Why Sony (SNE) Stock Is Slumping Today

NEW YORK (TheStreet) -- Shares of Sony Corp. (SNE) are down 10.12% to $18.20 in pre-market trade after the electronics maker said it expects to report a much greater net loss for the current fiscal year, as it cut the value of its mobile communications unit after smartphone sales failed to meet expectations, according to the Wall Street Journal.

The company today said it predicts a 230 billion yen ($2.15 billion) net loss for the year ending in March, compared with its previous forecast for a 50 billion yen loss.

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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 revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and poor profit margins."

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

  • SNE's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 654.6% when compared to the same quarter one year prior, rising from $35.08 million to $264.69 million.
  • Net operating cash flow has significantly increased by 149.28% to $654.05 million when compared to the same quarter last year. Despite an increase in cash flow of 149.28%, SONY CORP is still growing at a significantly lower rate than the industry average of 245.93%.
  • SNE has underperformed the S&P 500 Index, declining 6.34% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.
  • You can view the full analysis from the report here: SNE Ratings Report
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