Shares of Sony (NYSE:SNE) have been showing signs of life this month, after a long downtrend kept SNE under serious pressure. Is it a safe buy now and how much upside could exist?
Source: Dalvenjah via Flickr
No stock is necessarily a “safe” pick, but if investors enter into a favorable risk/reward, they can enhance the odds of the latter and reduce the odds of the former.
With Sony stock, the charts point to a potentially favorable entry near current levels. As for upside, the average price target from analysts sits at $66.55, more than 36% above current levels.
SNE stock received an upgrade from Macquarie analysts on Tuesday morning. They went from neutral to outperform, although did not assign a price target. That follows Jefferies, who last week upgraded the stock to buy from hold. These analysts did include a price target, which went from $50.70 to $58. Even if Sony stock “only” rallied to this mark, it would represent more than 24% upside from current levels.
Trading Sony Stock
Above is a two-year weekly chart of Sony stock. April was a big month for Sony, as the stock hammered out a bottom near $42. It took about three weeks to solidify, but once it did, the share price took off.
It pushed right through $45, a key mark. More important, it broke out of its downward channel. This channel, highlighted in blue on the chart, has been pressuring Sony stock lower for six months. For SNE to break out of this channel is a critical development for bulls and could suggest more upside.
With shares getting hit down toward $46.50, this could give interested bulls an entry on the long side. As long as SNE stock stays north of prior downtrend resistance, it’s okay on the long side. For now, Sony stock is holding up over the 10-week moving average as well. If this moving average acts as support, that’s very promising for potential upside.
That said, investors have to contend with news of lower video game sales last month. That news isn’t just bad for Sony, but Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA) and others. The exception may be Nintendo (OTCMKTS:NTDOY), which suddenly found itself in demand when China became open to allowing the Switch in the country.
More notably, Sony earnings are on April 26. Many will want to wait until after the report before entering Sony stock, and I do not blame them.
Bottom Line on Sony Stock
When Sony reports its fiscal fourth-quarter results later this week, analysts will be looking for earnings of 19 cents per share on revenue of $18.79 billion. Those earnings estimates are down almost 30% from 90 days ago, when analysts were looking for 27 cents per share in earnings. In-line revenue results would result in 4.3% year-over-year growth.
Overall, analysts are looking for full-year earnings of $5.86 per share on revenue of $77.58 billion. Should SNE achieve these numbers, it will represent 67% growth and 0.60% growth, respectively. However, in fiscal 2020, estimates call for earnings of “just” $3.85 per share. That puts Sony stock at about 12 times next year’s earnings (the fiscal year of which will start this quarter).
For short-term traders, SNE is likely too much of a mixed bag. However, for investors that like its long-term prospects, Sony stock has some attractive qualities. Consider current levels a decent entry for a partial position. Those who choose to wait can see whether nearby support is legit or if it will fail.
Should Sony stock rally, I want to see how it handles $50.
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