SONY Raises PS5 Price Amid Global Economic Challenges

Sony Company SONY has announced that it is increasing the price of its PS5 console in select markets in Europe, Middle East and Africa (EMEA), Asia-Pacific (APAC), Latin America (LATAM) and Canada. According to the company’s blog, this will not increase the price of the console in the United States.

The current price increase is due to a sharp rise in inflation and the depreciation of the yen against the dollar. Continued rising global costs and shortages of semiconductors hampered production.

Sony Corporation Pricing and Consensus

Sony Corporation Price Consensus Chart | Quote from Sony Corporation

The increase in supply and logistics are major constraints on distribution, which creates a huge imbalance between supply and demand.

According to a Financial Times report, when the PS5 was launched (November 2020), the yen was trading at around ¥105 against the US dollar. Since June 2022, the yen has depreciated dramatically to levels of 130 yen to the dollar, increasing the cost of producing yen.

Further citing Sony’s long-term analyst Pelham Smithers, the Financial Times report added that according to the analyst, the company is losing around ¥15,000 on every PS5 sold in Japan, while globally globally, the average loss per machine is around $50, due to higher material and crude prices and devaluation of the yen.

Recently, Sony was reportedly slapped with a lawsuit for allegedly “overcharging” millions of its PlayStation customers in the UK by exploiting its market dominance. According to the report, Sony imposed “unfair” terms and conditions on game developers/publishers, leading to unfair pricing, which was ultimately passed on to PlayStation end customers.

The company designs, manufactures and sells several consumer and industrial electronic equipment. The company invests heavily in research and development to launch new products and improve the existing product line.

The company reported net earnings per share for the first quarter of fiscal 2022 (on a GAAP basis) of 175.21 yen per share, up from 169.22 yen reported in the year-ago quarter.

Quarterly total revenue edged up 2.4% year-on-year to 2,311.5 billion yen ($17,842.4 million). However, due to weak macro-economic conditions, the company lowered its operating profit forecast. Operating profit is now expected to be 1.11 trillion yen, suggesting an 8% year-on-year decline. Earlier, operating profit was expected at 1.16 trillion yen.

The unfavorable currency movement coupled with the ongoing lawsuit is a major headwind for Sony.

He currently has a Zacks rank of #3 (Hold). The stock has lost 20.3% over the past year, as the sector has fallen 23.1%.

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Actions to consider

Some top-ranked stocks in the broader tech space are Cadence Design Systems CDNS, badger meter BMI and Arista Networks A NET. Cadence Design Systems and Arista Networks each sport a Zacks Rank #1 (Strong Buy), while Badger Meter carries a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

The Zacks consensus estimate for CDNS 2022 earnings is pegged at $4.11 per share, up 5.7% over the past 60 days. The long-term earnings growth rate is expected to be 17.7%.

Cadence’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 9.8%. Shares of CDNS have jumped 8.5% over the past year.

The Zacks consensus estimate for BMI’s earnings in 2022 is pegged at $2.30 per share, up 6% over the past 60 days.

Earnings at Badger Meter have exceeded the Zacks consensus estimate in three of the previous four quarters, averaging 12.6%. BMI shares have lost 9.3% of their value over the past year.

Zacks’ consensus estimate for Arista Network’s 2022 earnings is pegged at $4.04 per share, up 9.8% over the past 60 days. The long-term earnings growth rate is expected to be 18.6%.

Arista Network’s earnings have exceeded Zacks’ consensus estimate for the past four quarters, averaging 10.1%. ANET shares have risen 32.2% over the past year.

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