6758: Games And Subscription Content Will Drive Future Earnings Re-Rating

Analysts have nudged their price target on Sony Group modestly higher, reflecting a roughly 1 percent increase in fair value to about ¥5,150. They point to upgraded ratings, better than expected quarterly results, and growing confidence in the company’s games, music, and subscription businesses.

Analyst Commentary

Bullish analysts are increasingly constructive on Sony Group, citing a stronger earnings trajectory and more resilient demand across core content and subscription businesses. Recent target price increases reflect confidence that management can deliver above-consensus growth while unlocking further value from its diversified portfolio.

Bullish Takeaways

• Upgrades to Buy and Outperform ratings are driven by higher operating profit forecasts and sum of the parts valuations that assume sustained momentum in games, anime, and music, supporting further multiple expansion from current levels.
• Stronger than expected quarterly results, with beats on both revenue and earnings, have reinforced the view that execution is improving and that guidance raises are credible rather than one off.
• Forecasts for renewed growth in PS Plus and continued strength in USD recorded music streaming revenue suggest that recurring digital income can provide a more visible and higher margin earnings base.
• Contract renewals with major digital service providers in music underpin expectations for steady pricing power and volume growth, which bullish analysts see as underappreciated in current valuation models.

Bearish Takeaways

• Bearish analysts caution that recent target price hikes already incorporate optimistic assumptions on subscription reacceleration, leaving limited room for error if PS Plus growth falls short.
• There is concern that reliance on continued strength in music streaming and premium content could face cyclical or competitive pressures, which would challenge the durability of current margin expansion.
• Some more cautious views highlight that the rerating case depends on sustained outperformance of games, anime, and music simultaneously, raising execution risk if any segment underdelivers.

What's in the News

• Sony raised its full year fiscal 2026 guidance, now expecting JPY 12 trillion in sales, JPY 1.43 trillion in operating income, and JPY 1.05 trillion in net income, with tariff impacts from recent U.S. policy changes already included in the forecast (company guidance).
• The company announced a new share repurchase program of up to 35 million shares, or 0.59% of outstanding stock, totaling JPY 100 billion, alongside continued execution of earlier buybacks that have already retired over 63 million shares (buyback announcements).
• Sony declared an interim dividend of JPY 12.50 per share for the six months ended September 30, 2025, with payment scheduled to begin on December 5, 2025 (dividend announcement).
• Sony Pictures secured screen rights to the Labubu doll brand, with plans to produce a movie and build a broader franchise around the IP (Hollywood Reporter).
• Sony Bank has applied for a U.S. banking license and is exploring the launch of a dollar backed stablecoin as it expands its financial services footprint (Nikkei).

Valuation Changes

• Fair value was nudged higher from approximately ¥5,077 to about ¥5,151, reflecting a modest upward reassessment of intrinsic value.
• The discount rate rose slightly from about 6.55% to roughly 6.60%, implying a marginally higher required return in the valuation model.
• Revenue growth was revised to a slightly less negative trajectory, improving from around negative 9.43% to about negative 8.89% year over year.
• The net profit margin was effectively unchanged, edging down marginally from about 10.21% to roughly 10.21% in the updated forecasts.
• The future P/E increased modestly from roughly 26.8x to about 27.2x, indicating a small expansion in the multiple applied to forward earnings.