How 'Spider-Man,' the PlayStation 4 and Electronics Have Pushed Sony's Stock to Nine-Year Highs

Sony's Billion-Dollar Write-Down - reboot of Spiderman -H 2017
Courtesy of Tom Holland/CTMG

The turnaround under CEO Kaz Hirai is taking shape, and the recent box-office boost from Spidey is icing on the cake.

Sony Corp. stock has been hitting nine-year highs as of late, reaching its highest prices of the tenure of CEO Kaz Hirai.

The return to profitability of its electronics business, the confidence-boosting box-office performance of Spider-Man: Homecoming and continued strong sales of the PlayStation 4 (PS4) have all boosted investor sentiment.

The electronics and entertainment conglomerate's stock closed down slightly in Tokyo on Friday at ?4,533 ($40.82), having on Thursday recorded its highest level since the global financial crisis in 2008. The stock is up 38 percent this year.

When Hirai took the helm in April 2012, Sony shares were trading at around ?1,600 yen ($14.30) only to halve by November that year after it posted its seventh straight quarter of losses. However, since that low point, the stock has risen more than 400 percent as Sony's turnaround has taken shape.

The company's market capitalization ended the week at ?5.81 trillion, or $51.5 billion, taking it above that of car giant Honda Motor (?5.57 trillion) for the first time in almost 15 years and back into the top 10 highest-valued companies on the Tokyo Stock Exchange. Toyota is number one with a market capitalization of 20.32 trillion, or $183 billion.

"On the content side, there has clearly been some boost from Baby Driver and Spider-Man, while in music, the better-than-expected growth of the U.S. streaming market is also helping," Damian Thong, an analyst who covers Sony at Macquarie Capital Securities in Tokyo, told The Hollywood Reporter.

Spider-Man: Homecoming is nudging $600 million globally after less than three weeks in theaters, with major markets including China and Japan still to come. With the reboot of the franchise already taking nearly $50 million in South Korea, its East Asian neighbors should add another $150 million to its tally.

"After the relatively lackluster performance of the last two Spider-Man films, I think there was a kind of angst about the ability to push ahead with a franchise that is very closely identified with the studio. Then last year, the failure of Ghostbusters was a big shock to everyone," Thong said. "I hope this will reinvigorate confidence in their ability to create successful films."

Although CEO Hirai has repeatedly emphasized the importance of Sony Pictures, the division is only one part of the corporation, and it contributed $8 billion to the company's latest full fiscal year sales of nearly $68 billion.

As such, the turnaround in the core electronics businesses has been key. It has allowed Sony to predict record profits for the current fiscal year.

The home entertainment & sound division, once a pillar of Sony and home to iconic products like the Walkman, lost ?84.3 billion, or $760 million at current rates, in Hirai's first year at the helm. Following a program of cost-cutting and focus on bringing innovative products to market faster under Hirai and CFO Kenichiro Yoshida, Sony in the latest fiscal year ended March logged a profit of $522 million.

"There's a sense that Sony has been running a very tight ship in its consumer electronics business, enabling it to make money even in formerly loss-making areas like television manufacturing," Thong said. "They have also established two growth areas in the form of sensors, which are used by Apple and Chinese handset manufacturers, and the game business."

The PS4 has exceeded expectations at a time when the death of console gaming was being predicted by many, selling more than 60 million units and nearly 500 million games since its launch at the end of 2013. The virtual reality headset PlayStation VR shipped more than 400,000 units in the first calendar quarter of this year, providing the console business with a further boost.

On the other hand, Sony's goal to turn the PS4 into a media and entertainment hub has "largely failed, as has Microsoft's with the Xbox," Thong noted. "People aren't prepared to pay for that functionality."

Sony will release its fiscal first-quarter earnings on Tuesday and analysts will be waiting to see if PS4 sales have slowed significantly. The game division has been a consistent bright spot for Sony since its launch, but the console is now entering its fourth year and facing stiff competition from Nintendo's Switch. 

The film division's quarterly results will not see any benefits from the latest Spider-Man yet as that was released in early July. But analysts hope that its success will be a sign of things to come. Said Thong: "Although there are still concerns about franchise reboots, this should allow them to press reset and build some strong franchises."