Strong movie deals, sharp content development for its PlayStation and a coup with Disney mean the international conglomerate is undervalued at current levels, say Phat Prophets.

Sony has been bolstering its content via acquisitions in recent years. Earlier in 2019, the company announced the acquisition of the Insomniac Games studio.
This is the video game studio behind the highly-acclaimed Ratchet & Clank series and Marvel Spiderman among others and becomes the 14th studio to join the Sony Interactive Entertainment roster.
The terms were not disclosed but it will strengthen Sonys already formidable in-house team to develop content for the PlayStation ecosystem.
Sony was also able to reach an agreement with Disneys Marvel on the Spiderman IP, which will benefit both companies but we believe it is a coup for Sony.
The Morbius and Venom characters will also be allied with the Marvel Cinematic Universe (MCU), which helped the most recent Spider-Man movies perform extraordinarily well at the box office. Indeed Spiderman: Far From Home took in roughly $US1.13 billion last year.
Sony reported a 16 per cent year-on-year increase in operating profit at the last fiscal second quarter, hitting a record level for that period. It was a strong result and robust sales of image sensors helped offset lower earnings from its gaming business as the PlayStation 4 nears the end of its life cycle.
Looking ahead, Sony lifted its full-year operating profit forecast from 810 billion yen to 840 billion yen. Its full-year forecast assumes little change in the value of the yen to the US dollar and euro relative to the fiscal second quarter.
We have a positive view on Sony, as the company looks to be on the right path by focusing more on higher margin and recurring sources of revenue with content music, movies and games as the future drivers.
The imaging sensors business is riding a wave of demand for multiple-lens camera systems. Next year, the new PlayStation will breathe fresh life into the key gaming segment. The balance sheet is strong and further corporate restructuring has the potential to unlock more value. We view Sony as undervalued at current levels.
Interests associated with Fat Prophets hold shares in Sony. For a free trial to Fat Prophets’ daily market commentary, please click here.