Will Sony Find Support?

With shares of Sony (NYSE:SNE) trading around $17, is SNE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Sony is involved in the electronics, games, entertainment, and financial businesses. The company operates in several different segments: Consumer Products Services, Professional Device Solutions, Movie, Music, Finance, Mobile, and Other. Through its segments, Sony is able to provide a wide range of products and services. These products include televisions, cameras, personal computers, game consoles, navigation systems, audio and video equipment, software, phones, and media platforms. The company brings new technologies to the hands of your average player as well as professional users. Look for Sony to continue to be a top choice for avid technology adopters worldwide.

According to the latest data from NPD Group seen by Bloomberg, Sony sold more than twice as many of its new PlayStation 4 video game consoles than Microsoft (NASDAQ:MSFT) sold of its competing Xbox One device in the first month of 2014. NPD didn’t give exact figures on how many PlayStation 4s Sony sold in January, only saying that it was twice as many as the amount of Xbox Ones sold during the month. Sony cited the NPD data in an email to Bloomberg and said that combined with the last-generation PlayStation 3, Sony sold more video game consoles than any other company in the first month of the year.

T = Technicals on the Stock Chart Are Weak

Sony stock has seen its fair share of struggles over the past few years. The stock is currently trading sideways and may need time to stabilize before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sony is trading slightly below its rising key averages, which signals neutral to bearish price action in the near-term.

SNE

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Sony options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Sony options

31.8%

3%

0%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

March Options

Steep

Average

April Options

Steep

Average

As of Friday, there is average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sony’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sony look like and more importantly, how did the markets like these numbers?

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

115.39%

22.71%

82.5%

125.35%

Revenue Growth (Y-O-Y)

23.86%

10.64%

-8.96%

-5.41%

Earnings Reaction

3.89%

-11.17%

4.37%

0.78%

Sony has seen increasing earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Sony’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Sony stock done relative to its peers – Microsoft (NASDAQ:MSFT), Canon (NYSE:CAJ), and Dolby Laboratories (NYSE:DLB) — and sector?

Sony

Microsoft

Canon

Dolby Laboratories

Sector

Year-to-Date Return

-1.5%

0.69%

-6.38%

7.6%

1.1%

Sony has been an average performer, year-to-date.

Conclusion

Sony is a provider of innovative technology products to consumers and companies worldwide. The company sold more than twice as many of its new PlayStation 4 video game consoles than Microsoft sold of its competing Xbox One device in the first month of 2014. The stock has struggled in recent years and is currently trading sideways. Over the last four quarters, earnings have increased while revenues are mixed, which has produced mixed feelings among investors. Relative to its peers and sector, Sony has been an average year-to-date performer. WAIT AND SEE what Sony does this coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

More from Wall St. Cheat Sheet:

More from The Cheat Sheet