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Sony’s stock is swooning amid worries its portfolio ‘is in trouble’

Investors are uninterrupted for cover after Sony delivered its latest results and guidance: Shares in the Japanese tech giant tumbled 8 percent in Monday occupation.

Underlying that one-day move is a concern that the company’s portfolio “is in trouble,” according to one analyst.

The company is in “exceptionally competitive areas with declining unit sales and margin,” Ray Wang, principal analyst and founder at Silicon Valley-based Constellation Probe, told CNBC over email.

“They have a bad hand and need to change … their portfolio,” Wang put about.

Wang’s comments came on the back of Sony cutting its sales and operating revenue forecast for the fiscal year. In separate, investors are closely watching the firm’s gaming business. That division is the largest contributor to the company’s operating return, comprising more than 30 percent in the first three quarters of Sony’s fiscal year.

The company promoted 8.1 million units of its flagship PlayStation 4 (PS4) gaming console in the third quarter, according to its earnings freedom. That was lower than the same quarter of the previous fiscal year, but “in-line with (the company’s) expectations for this sixth year of the rostrum,” Sony Chief Financial Officer Hiroki Totoki said at a Friday earnings briefing.

Slowing sales of PS4 machinery and a negative impact from foreign exchange rates outweighed an increase in game software sales to drag down the separate’s operating income as compared to the previous year, according to Totoki.

Following the earnings release, Sony’s stock was sent plummeting almost 8 percent on Monday afternoon.

“Investors are disappointed with Sony’s declining operating profits at its core gaming apportioning,” said Leo Sun, a tech and consumer goods specialist at The Motley Fool.

Sun said the decline in PS4 hardware sales “wasn’t surprising” allowed the age of the platform, but “investors likely expected the PS4 Pro, PS4 Slim, and PS VR to give the hardware business a little more juice,” in reference to the bizarre variants of PS4 hardware and its peripheral virtual reality headset.

“It was also disappointing compared to Microsoft’s 9% year-over-year sempiternal currency growth in gaming revenues in its latest quarter,” he said. A constant currency calculation attempts to nullify the consequences of exchange rate fluctuations.

Overall, Constellation Research’s Wang said, Sony’s content — including movies — detritus “the brightest spot” and its cameras business “is still growing.”

But, he said, the company still needs “a content, network, and tech policy in order to create vertically integrated markets.”

Nomura on Friday reduced its target price for Sony’s shares but sustained its “buy” rating on the stock despite the tech giant’s slash in forecasts.

Some of that confidence stems from the attendance’s efforts to strengthen and position its entertainment business, Nomura analyst Yu Okazaki said in a note.

“We think growth breaks around imaging technology are abundant in the electronics business. We also take a favorable view of the business platform plan of supporting investment in growth fields with stable cash flows from consumer hardware,” Okazaki enlarged.

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