Sony (NYSE:SNE)'s stock price is at a 31-year low and now has a $14 billion market capitalization which I believe undervalues the company at these prices.
I became interested in the stock market indirectly through a movie called Star Wars in 1977. As a teen, I was anxious to see the movie Star Wars and after seeing it decided to buy the stock of 20th Century Fox on June 20, 1977, believing it would be a hit for the company. The stock doubled in a year.
Today, most studios are too large to bank on one movie to make the stock double. LionsGate (LGF) stock price moved on The Hunger Games and Disney (NYSE:DIS)’s stock did well when The Avengers opening weekend results were greater than expected.
This leads me to Sony Corp, the company that invented the Walkman, the ancestor of Apple's (NASDAQ:AAPL) IPod touch. Sony’s stock has been beaten down by investors as many have become non-believers in Managements plan to turn around its consumer products division. Fiscal year ending March 31, 2012, resulted in record sales of $87 billion with a record $5.7 billion annual net loss. Sony blamed the loss on the “unfavorable impact of foreign exchange rates, the impact of the Great East Japan Earthquake and the floods in Thailand, and deterioration in market conditions in developed countries." Sony did make $2.5 billion in operating profits from financial services, music and movies.
A brief look at Sony Corp:
According to their website: Sony Corporation is a leading manufacturer of audio, video, communications and information technology products for the consumer and professional markets. Its motion picture, television, computer entertainment, music and online businesses make Sony one of the most comprehensive entertainment and technology companies in the world. Sony recorded consolidated annual sales of approximately $87 billion for the fiscal year ended March 31, 2012, and it employs 168,200 people worldwide. The company is headquartered in Japan.
Business segments listed in the financials include:
1) Customer Products and Services
2) Professional Devices and Solutions
5) Financial Services
6) Sony Mobile Communications
Content (movies, TV and music) have caught a bid from Subscriber Content Streamers like Netflix(NASDAQ:NFLX), Amazon (AMNZ) and Crackle. Sony owns Columbia Pictures,which includes Spiderman, Men in Black, James Bond Franchises and many other movies that are very desirable to content streamers.
A recent article by the Financial Times, "Sony: Time to Face the Music” by Andrew Edgecliffe-Johnson, indicated that the music and picture segments may be worth $10 billion. With the ADRs at $14, the stock has a market capitalization of $14 billion.
In the next six months, Sony has three movies that could boost the stock price.
Men in Black 3 - Opening May 25, 2012
Spider-Man 4 - Opening July 3, 2012
SkyFall – James Bond - Opening Oct. 24, 2012
Below is a historical performance of Sony stock price with the prior Spider-Man movies
|One Month Prior||Opening Weekend||Change|
Spider-Man 3, currently, holds the fifth position of the largest openings of all time.
Will Spider-Man 4's opening weekend be a catalyst to boost Sony's stock price?
Spider-Man is not the superhero answer to Sony Corp.'s problems with its consumer division, but it does have the power to elevate the stock heading to opening night. With the stock at a 31-year low, $11 billion in cash and $9 billion in debt, an unparalleled content library, a $10 billion market value of its music and pictures segment, and management’s determination to turn around the consumer business, I believe Sony is
undervalued at this price.
About the author:
• Realized average annualized returns on self managed IRA account of 14% from January 2004 to December 2012 (total return 150+).
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