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Why Sony (SNE) Stock Is Plunging This Morning

NEW YORK (TheStreet) -- Shares of Sony Corp. (SNE - Get Report) are down -5.78 to $16.62 in pre-market trade after unexpectedly forecasting an annual loss, the sixth in seven years, casting further doubt on CEO Kazuo Hirai's ability to revive the company, Bloomberg reports

The net loss will probably be 50 billion yen, or $490 million, in the 12 months ending March 31, the company said today

That compares with the 57.1 billion-yen profit average of 19 estimates compiled by Bloomberg and a 128.4 billion-yen net loss the year earlier.

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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 compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 468.6% when compared to the same quarter one year prior, rising from -$72.42 million to $266.97 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.0%. Since the same quarter one year prior, revenues rose by 11.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SNE's debt-to-equity ratio is low, the quick ratio, which is currently 0.62, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for SONY CORP is currently extremely low, coming in at 7.87%. Regardless of SNE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.29% trails the industry average.
  • In its most recent trading session, SNE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: SNE Ratings Report

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