Goldman Downgrades Sony, Cuts Target

Sony's (SNE) shares tumbled some more in Tuesday trading in Tokyo following a downgrade and target share price cut by Goldman Sachs and on rumors of overheating PlayStation 3's.

Goldman downgraded Sony to "neutral" from "buy" and lowered its target share price to 5,150 yen ($43.67) from 5,600 yen ($47.48). Sony's ordinary shares (Tokyo: 6758) dropped 2.75% to close at 4,600 yen ($39.00), setting new calendar year intra-day and closing lows. Sony's ADRs lost 1.56% yesterday to close at $39.73.

Reuters.com quotes Goldman analysts Yuji Fujimori and Kei Nihonyanagi saying, "We have adopted a cautious view of the impact of the game business on the electronics business this term."

Goldman cut its estimate for Sony's operating profits in half to 100 billion yen ($850m). Sony's target is 130 billion yen ($1.1b). Part of its downgrade includes costs related to its ongoing notebook PC battery recall estimated at 40 billion yen ($339m) and another 49 billion yen ($415m) for the PS3 price cuts in Japan among other video game-related issues.

Another article by Reuters.com notes Goldman estimates a 30 billion yen ($254m) currency profit for Sony from weakness in the yen. However, this would be mostly offset by expected losses totaling 25 billion yen ($212m) in its TV business for its fiscal year.

Note that Nintendo raised its guidance again today. Also, if you invest in Japanese stocks it might be worth reading about the impact of the weak yen.

Sony Corp (SNE) 1-year chart:

Comment on this article

Disclosure: I do not own shares of any companies mentioned in this article.