Sony Group Corporation (SONY)

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Should You Buy, Sell, or Hold Sony Stock on Rumors of a Chips Business Spinoff?
Yiannis Zourmpanos - Barchart - Sat May 3, 6:00AM CDT Columnist
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Video game controllers by TheXomil via Pixabay
Video game controllers by TheXomil via Pixabay
Sony (SONY) is in the news following Bloomberg’s report that the Japanese electronics giant could split off its semiconductor business, Sony Semiconductor Solutions, as early as this year. The firm would offload most of its interests in the chip unit to shareholders and keep a minority stake, sources close to the situation told Bloomberg. Even so, implementation is uncertain and subject to revision. Investors should note that this development reopens an idea originally championed by activist investor Dan Loeb’s Third Point several years ago.

The possible split of Sony’s semiconductor business would represent a major strategic change. The semiconductors play an integral role in Sony’s image sensors and overall consumer electronics business, but shareholders have repeatedly contended that the division is undervalued as part of the overall conglomerate.

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The timing of such a spinoff would be intended to tap explosive global chip demand and rebalance shareholder value ahead of more widespread structural changes in the electronics supply chain.

About Sony Stock
Sony (SONY) is a diversified Japanese corporation headquartered in Tokyo. Its businesses span electronics, entertainment, gaming, and financial services. Sony’s market capitalization is now $153 billion.

Shares have climbed 50% in the last 52 weeks, recently reaching an all-time high above $26. The stock is up close to 20% since the beginning of this year, well above the S&P 500 Index’s (SPY) drop of about 4% since then. This is based on investor enthusiasm for both its entertainment content and semiconductor innovation.


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In terms of valuation, Sony’s forward price-earnings multiple stands at 18x and its price-sales multiple stands at 1.6x. Such numbers represent a decent premium to industry averages. However, there is an underlying chip