NEW YORK (TheStreet) -- Sony (SNE - Get Report) surged 5.4% to $16.08 Tuesday on speculation that it may sell its PC business. The intraday gains for the ADR shares were the biggest since May 21, 2013.
According to Japanese newspaper Nikkei, Sony is in talks to sell its computer business to Japan Industrial Partners. Such a deal would see Japan Industrial Partners buy the business, including the Vaio brand, for between 40 billion and 50 billion yen. The deal would result in a loss for Sony in its current fiscal year.
In the last quarter Sony lost money on its PC business. Divisions that make cameras and TVs also lost money for the electronics giant.
Sony previously denied rumors that it would sell its PC division to Lenovo, makers of the ThinkPad and IdeaPad lines of laptops.
TheStreet Ratings team rates SONY CORP as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SONY CORP (SNE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $1,223.24 million or 28.12% when compared to the same quarter last year. In addition, SONY CORP has also modestly surpassed the industry average cash flow growth rate of 19.01%.
- The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that SNE's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
- SONY CORP has improved earnings per share by 5.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, SONY CORP turned its bottom line around by earning $0.30 versus -$5.52 in the prior year. For the next year, the market is expecting a contraction of 41.7% in earnings ($0.18 versus $0.30).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, SONY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for SONY CORP is currently extremely low, coming in at 3.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.07% trails that of the industry average.
- You can view the full analysis from the report here: SNE Ratings Report