A recent report estimated that Sony's worth decreased by approximately $10 billion last week, following the adjustment in their PlayStation 5 sales projection.
Although Sony had previously planned to ship a record of 25 million PlayStation consoles during the current fiscal year ending in March, it announced in its latest quarterly earnings results last week that it would miss that target by four million units. After the earnings report, Sony shares fell 8.4%, closing down on 6.5%. This decline is partly the result of a revised PS5 hardware sales forecast, but also partly due to a decrease in operating margin in Sony's games business to 6%, compared to 9% in the December 2022 quarter and 12-13% in previous years.
According to the latest CNBC report, based on calculations with FactSet data, the drop in the stock price resulted in a loss of about $10 billion in the value of Sony shares after the revised forecast. Atul Goyal, an equity analyst at independent investment bank and financial services firm Jefferies, told CNBC that while the new delivery forecast is not that disappointing, the bigger problem is the low operating margin.
Goyal pointed out that Sony's margins should have increased during this period instead of decreasing. "Various positive factors were expected to lift margins to the 20 percent level," including growth in digital game sales and PS Plus services with a margin of around 50 percent. Goyal stated that "their revenue from digital sales, additional content and digital downloads is growing steadily, yet their margins are at their lowest level in a decade."
In its recent quarterly earnings report, Sony announced an expected gradual decline in PlayStation 5 hardware sales during the next fiscal year (April 2024 to March 2025). They also confirmed that they have no plans to release “major existing franchise titles” during the said 12-month period.
During a question-and-answer session following the earnings call, Sony and PlayStation president Hiroki Totoki said he wants the company to be "aggressive" in improving the gaming division's profit margins. He pointed out that this can be achieved in part by an increased focus on bringing first-party games to PC.
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