Sony’s value reportedly dropped by $10 billion following ‘disappointing’ PlayStation financials

A new report calculates that Sony‘s value dropped by around $10 billion last week, following its revised PS5 sales forecast.

While Sony had previously hoped to ship a record 25 million PlayStation consoles during its current fiscal year ending in March, last week it said during its latest quarterly earnings results that it now expects to miss that target by four million units.

Following the earnings report, Sony shares fell as much as 8.4% and closed down 6.5%, partly as a result of the revised PS5 hardware sales forecast, but also partly due to a drop in operating margin in Sony’s gaming business to 6% (compared to 9% in the December quarter of 2022 and 12-13% in the years before this).

Now a new report on CNBC, in which the news outlet has made a caculation using FactSet data, suggests this drop in share price has resulted in around $10 billion of value being wiped from Sony’s stock since the forecast cut.

Jefferies equity analyst Atul Goyal told CNBC that the new shipment forecast wasn’t as disappointing as the low level of operating margin.

Goyal explained that the operating margins at Sony’s gaming division were 12-13% for four years, and that its current margin of 6% are “extremely disappointing”, and “almost near decade lows”.

Goyal also said that Sony’s margins should have been rising during this period instead of falling, given that there are “various tailwinds that should have driven up the margins towards 20%” such as the increase in digital game sales as well as Sony’s PS Plus service, which has a margin of around 50%.

“Their revenue on digital sales, add-on-content, digital-downloads are at all time highs,” Goyal said, “and yet their margins are at decade-lows. This is just not acceptable.”

During its latest quarterly financial earnings call last week, Sony said it expects PlayStation 5 hardware sales to “gradually decline” during its next fiscal year (April 2024 to March 2025), and confirmed it plans to release no “major existing franchise titles” during this 12-month period.

In a Q&A session following the earnings call, Sony president and PlayStation chairman Hiroki Totoki said he wants the company to be “aggressive” when it comes to improving the gaming division’s profit margins, which he says can partly be achieved with a greater focus on bringing first-party games to PC.