Is Sony a Buy Amid the Chip Shortage?

NYSE: SONY | Sony Corporation News, Ratings, and Charts

SONY – Auto Manufacturers and electronics companies are struggling to meet demand due to a global chip shortage. This has hampered Sony’s (SNE) ability to keep their new PlayStation on store shelves. Is the company still a Buy? Read more to find out.

One of the biggest news stories in the market over the past couple of weeks has been the shortage of semiconductor chips. This was likely caused by semiconductor manufacturers shutting down their factories at the beginning of the coronavirus pandemic. While these companies eventually started producing chips again, there has been a massive demand for chips from auto manufacturers and consumer electronics companies, such as Sony (SNE).

SNE had a huge launch with its PlayStation 5 (PS5), but many people are still having a hard time finding the console in stores due to the chip shortage. This brings up the question of whether SNE’s stock is still worth buying.

The Company

Sony has been a giant in the electronics industry for a long time. It created the first all-transistor television in the 1950s and was instrumental in starting personal music entertainment with the Walkman in the 1980s. Sony continues to make TVs and audio systems today but it is also actively involved in the entertainment industry, creating content, and manufacturing equipment.  However its biggest growth driver right now is the PlayStation video game console.

Thesis for Buying

The PS5 console was launched in November 2020, and the company sold 3.4 million units within a month. Management believes this was the most successful launch in its history and expects to produce 18 million units this year. While the consoles themselves don’t make the company much money, as they are typically sold at a loss, they lead to massive revenue through software sales.

For every video game sold for the PS5, the company can receive anywhere from 33% to 100% of the game’s price. Revenue from the game’s sale goes to the game creator/publisher, the retailer, and the platform operator (Sony). If SNE publishes and distributes its own game, it keeps all the revenue. If it sells a third-party game, it keeps one-third of the sales. So, you can see how this adds up.

Video games are not Sony’s only revenue source. Its music segment benefits from healthy streaming revenues, and it recently introduced its 360 Reality Audio music experience. This allows listeners to feel like they’re immersed in sound from every direction. SNE also sees strong growth in its financial services division due to higher profits from its investments at Sony Life and Sony Bank.

Finally, the company is also dipping its toes in the electric vehicle market with the Vision S.

POWR Ratings

SNE has an overall grade of A, indicating a Strong Buy in our POWR Ratings system. While not typically considered a growth stock, the launch of the PlayStation 5 has resulted in a Growth Grade of B.

The company recently released strong financial results for the fiscal third-quarter. Revenues beat estimates and came in at $25.6 billion, up 9% year over year. Net income rose 62%. Its gaming and music segments drove the revenue growth.

Gaming and network services revenue grew 40%, and music sales jumped 22%. The game & network services segment benefited from an increase in game software sales and PlayStation Plus subscriptions. The company also raised its forecast for its fiscal year ending Mar 31, 2021.

SNE also has a Sentiment Grade of A, which means Analysts love the stock. The stock has also shown strong momentum over the near, mid, and long-term, resulting in a Momentum Grade of B. We also rate SNE by Value, Stability, and Quality, which you can find here. The stock is ranked #1 in the Entertainment – Media Producers industry. If you’re interested in finding other top stocks in this industry, make sure you click here.

Final Verdict

While the chip shortage affects the company’s short-term production, I don’t see that as a reason not to consider the stock. As more factories open up and chip manufacturing increases to meet demand, SNE should be able to increase the number of PlayStations it sells. In the meantime, the revenue from video games and music should continue to support a Buy thesis.

Want More Great Investing Ideas?

9 “MUST OWN” Growth Stocks for 2021

4,000 or Bust for S&P 500!

7 Best ETFs for the NEXT Bull Market

5 WINNING Stocks Chart Patterns


SNE shares fell $0.92 (-0.81%) in premarket trading Friday. Year-to-date, SNE has gained 11.82%, versus a 4.35% rise in the benchmark S&P 500 index during the same period.


About the Author: David Cohne


David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
Get RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

How to Profit from the Growth Stock Crash?

The POWR Growth service has significatly outperformed the S&P 500 (SPY) despite a challenging environment for growth stocks. Now, there are subtle signs of improvement. Some of the best performing stocks were bought in the aftermath of market corrections and this time will be no different. Read on to find out how POWR Growth can help you profit for the rest of 2022…

:  |  News, Ratings, and Charts

5 High Growth Stocks to Buy Amid a Volatile Market

Concerns over aggressive interest rate hikes to fight the multi-decade high inflation and a looming recession have recently kept the stock market under pressure. However, growth stocks Taro Pharmaceutical (TARO), Superior Industries (SUP), Viavi Solutions (VIAV), CEVA (CEVA), and SMART Global Holdings (SGH) are well-positioned to rebound.

:  |  News, Ratings, and Charts

Is the Market Rally for Real This Time?

Another impressive rally this week after flirting with bear market territory. The question on everyone's mind...Is it safe yet??? Meaning are we done with this correction and getting back to bull market conditions. Or is this yet another temporary rally that gives way to the next leg lower? Exploring those important topics will be at the center of our POWR Value commentary today. Read on below for more…

:  |  News, Ratings, and Charts

4 Top-Rated Stocks Under $10 to Buy This Month

Though the major stock market indexes made a comeback yesterday following statements from the Biden administration hinting at the possibility of removing U.S tariffs on China, concerns over surging inflation and consequent monetary policy tightening are anticipated to keep the stock market under pressure in the near term. Therefore, we think it could be wise to bet on fundamentally sound low-priced stocks Assertio Holdings, Inc. (ASRT), Overseas Shipholding Group, Inc. (OSG), SunCoke Energy, Inc. (SXC), and Global Cord Blood Corporation (CO). These stocks are top-rated in our proprietary rating system.

:  |  News, Ratings, and Charts

Is the Market Rally for Real This Time?

Another impressive rally this week after flirting with bear market territory. The question on everyone's mind...Is it safe yet??? Meaning are we done with this correction and getting back to bull market conditions. Or is this yet another temporary rally that gives way to the next leg lower? Exploring those important topics will be at the center of our POWR Value commentary today. Read on below for more…

Read More Stories

More Sony Corporation (SONY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SONY News