Sony Corp (ADR) (NYSE:SNE) is up 57% in the past year. That’s pretty impressive for a huge consumer electronics and entertainment company. And the fact is, the climb in SNE stock has just begun.
It made the cameras and monitors for most of the television networks and movie studios.
As low-priced Japanese cars came into the U.S. market, more American consumers were exposed to Japanese quality.
And they were impressed. Since U.S. manufacturers weren’t really expecting any competition from abroad at any significant scale, they sold goods at premium prices, even if the goods didn’t really carry a quality premium.
Japanese autos were a hit. And it shook Detroit up. The same thing happened on the electronics side, but Sony came in on the high end. It introduced top quality screens and audio into a market that was happy with decent quality. Plus, the premium wasn’t significant, but just enough to make the middle class go out and get one just to impress their neighbor.
Then, as more Japanese electronics hit the market, Sony was the first to innovate. By the 1980s, the Walkman — a portable device so you could carry around your music — hit and music was never the same again. Japan married the quality of German equipment with the mass pricing of the U.S. market.
But this heyday was overtaken by Apple Inc. (NASDAQ:AAPL) by the 1990s and Sony has been diversifying, moving into various sectors and doing just about everything to become relevant once again.
Finally, it seems to be working.
What’s Ahead for SNE Stock?
Its newest gaming console, PlayStation 4, is a huge hit. So much so, it sold more than 70 million units in 2017 trouncing the Xbox and Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) competition.
Yes, the U.S. market has been a big factor in this success, but also Asia’s gaming culture is very big and much of the sales have come from Japan and China. And this is very important in the larger scheme of things.
While Japan has spent decades looking to regain its footing in the U.S., it seems whether consciously or not, that a pivot to Asia, specifically China, is where the next stage of growth exists.
For example, earnings-per-share in the quarter ending in December 2017 were up a staggering 1,400%. No, that’s not a typo. Operating income was up 346%. Every sector, except Semiconductors and Imaging Products was up by double digits.
Sony is finding its footing again. And SNE stock is reflecting this new momentum. And even after this run, the stock, relative to the free cash flow it’s throwing off, is still significantly underpriced.
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Source: Investor Place