Movies, music, electronics -- there isn't a whole lot that Japanese electronics and entertainment conglomerate Sony
We'll have time aplenty to dissect the numbers after the news comes out. But before we begin obsessing over Sony's short-term progress, let's use these last few hours to review what investors think about it as a long-term investment.
Our tool in this endeavor: Motley Fool CAPS, where we poll more than 100,000 investors for their views on more than 5,600 companies, with foreign and domestic companies receiving equal time. Here's what Fools have to say about Sony and its long-term prospects.
Up or down?
Nearly 1,300 investors have submitted ratings on Sony. Their verdict: So "it's a Sony." Big deal.
Barely seven investors in 10 expect Sony to outperform the market -- miserable numbers when you consider that your run-of-the-mill decent company scores 90% or better on CAPS. Worse, our very best investors (the CAPS All-Stars) give this company fewer than six votes in 10. Little wonder that Sony scores just two stars out of five possible on CAPS:
|
Electronic Equipment Group |
|
|---|---|
|
SRS Labs |
***** |
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EchoStar |
***** |
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Jinpan International |
**** |
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General Electric |
**** |
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Syntax-Brillian |
*** |
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Tyco Electronics |
*** |
|
Sony |
** |
Wall Street vs. Main Street
In contrast, Wall Street feels downright bullish about Sony's prospects. Of the dozen analysts who've taken affirmative buy/sell positions on the stock, the voting runs 11-to-1 in Sony's favor.
Bull pitch
STA5248 holds the title of top-rated Sony fan on CAPS:
Let's think of Sony not only in terms of the Playstation brand. Sony is a well diversified electronics maker with businesses ranging from TV, PCs, cameras, and even financial services. ... Sony has been losing a lot of money in the past couple years, but only recently have started to turn around. Operating margins for this year is estimated to be 5% compared to the Wall Street's estimate of 4%. In addition, total revenues are up by over 10% and net profits are considered to rise by a good amount as well. The cybershot, ericsson, vaio divisions are all doing very well as well as their financial division which had one of the biggest stock offerings in Japan. ... Howard Stringer ... streamlined Sony to get rid of its unprofitable divisions, such as the lovable Aibo robots.
So basically, STA5248 tells us to be patient and give Sony more time to execute its turnaround. Seems a fair request. Sony's stock sells for a P/E ratio of 18, which looks reasonable based on Wall Street's 14% growth projections. The company's also generating cash profits slightly ahead of what it reports as net earnings under GAAP. And the company even pays a small dividend to reward you for your patience. So what's the flip side?
Bear pitch
quaoar suggests that patience in this case must last at least a year before investors see improvement at Sony. Like STA5248, quaoar's pitch dates from December 2007:
Growth will slow next year across consumer entertainment lines as consumers cut back on premium brand name items and turn to cheaper models like Visio. The PS3 will continue to under perform and inventories will increase, crushing margins and dragging the rest of Sony's units down. ... Additionally, the bottom-line effect of the newest PS3 $100 price cut has yet to be seen. The machine has been redesigned to have a reduced bill of materials, which should benefit Sony in the long run, but it is likely still selling it at a loss and we have no idea when they will reduce enough costs to break even. Sony expected to make up hardware losses with software royalties, but so far software sales on the PS3 have been abysmal. 2008 won't be a good year for this company, in my humble opinion.
Tomorrow we'll find out whether management agrees.
Who said that?
To learn more about the wise Fools who penned these words, examine their records (and see whether they know whereof they speak), and to explore the plethora of additional financial data we've put together on the company, just click here.
To catch up on Sony:
