Sony shares surge after boosting forecast on game demand

30-Oct-2020 Intellasia | JapanTimes | 6:02 AM Print This Post

Sony Corp. shares soared Thursday after the company raised its fiscal-year operating profit outlook by 13 percent the previous day, with a surge in demand for video games from home-bound consumers.

The forecast of JPY 700 billion ($6.7 billion), up from a previous JPY 620 billion, surpassed the average analyst expectation of JPY 658.9 billion and precedes the highly anticipated November debut of the PlayStation 5 (PS5). Sony’s stock climbed as much as 5.8 percent in Tokyo, the biggest intraday gain since March.

The firm aims to sell more than 7.6 million PS5 units by the end of March, more than its predecessor, the PlayStation 4 (PS4), managed in its first fiscal year, Chief Financial Officer Hiroki Totoki said.

Sony’s outlook hike underscores how the entertainment giant is benefiting from a global pandemic-era consumer shift. While sales of its smartphone image sensors have been hit by US-China trade tensions, the company is drawing gamers to its online services. Sony is betting that the PS5 will help it outdo Nintendo Co. during the all-important holidays and drive growth.

Hardware sales of the new console are likely to contribute “a small minus” to Sony’s bottom line over its first few months, the CFO added, confirming expectations that it will be a loss leader to begin with.

Operating profit for the three-month period ended September 30 rose 14 percent to JPY 318 billion, outstripping expectations. Game software sales in the quarter were JPY 331 billion, down from the JPY 432.5 billion of the prior three months. Sony now has 45.9 million members signed up for its PlayStation Plus subscription, up from 45 million in the prior quarter.

Sony’s revised forecast suggests the company is preparing to take a significant loss from the planned launch of its next-generation PS5, said Ace Research Institute’s Hideki Yasuda. Given that the gaming division has already booked JPY 229 billion in profit from the first six months, the slight increase expected for the second half of the fiscal year points to a bigger increase in spending, he said.

“Sony will spend a lot of money to deliver many units of the PlayStation 5 to the US, probably by air,” Yasuda said. “The hardware would be sold at a slight loss as well.”

Sony Interactive Entertainment Chief Executive Officer Jim Ryan said the company pre-sold as many PS5 units in the device’s first 12 hours of availability as it did in the PS4′s first 12 weeks.

The COVID-19 virus continued to weigh on Sony’s motion picture business, as many theaters around the world remained far shy of capacity, though the unit may be headed for a bump in the next quarter, according to Bloomberg Intelligence analyst Masahiro Wakasugi.

This is largely thanks to the runaway success of “Demon Slayer,” a movie released to theaters October 16. It recorded the fastest box office debut on record in Japan with JPY 10.8 billion earned in its first 10 days.


Category: Japan

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