Investing.com -- Morgan Stanley labelled Sony (NYSE:SONY) its top pick in consumer electronics and Japan semiconductors given its sustained growth prospects for its games & network services segment, particularly its PlayStation business.
The brokerage raised its price target for Sony's stock to ¥4,000 from ¥3,400 on higher earnings forecasts and valuation multiples for games segment.
The evolution of Sony's PlayStation business model and its deepening user engagement, aided by advanced use of network data and AI, have bolstered software and network service sales while controlling costs.
The EV/EBITDA multiple for gaming segment was raised to 14x from 12x, given the platform's growing competitiveness and mid-to-long-term profit potential.
Adjustments to valuation metrics post the planned October 2025 spin-off of Sony Financial Group reflect better balance sheet clarity.
Morgan Stanley (NYSE:MS) anticipates robust G&NS earnings in fiscal 2025, fuelled by over 110 million active PlayStation users and the platform's strong position for publishers.
Additionally, opportunities to expand Sony's CrunchyRoll platform and deepen ties with Kadokawa offer upside potential.
Risks include heightened competition from Nintendo's anticipated Switch (NYSE:SWCH) successor and potential softness in high-end smartphone markets.