Sony shares enjoy biggest jump in 9 years on outlook
Sony's shares surged yesterday to post their biggest daily gain in nine years after the consumer electronics and entertainment group lifted its full-year forecast, raising hopes its restructuring efforts were finally bearing fruit.
Backed by cost cuts and stronger sales of sensors and video games, Sony trimmed its net loss estimate for the year through end-March and forecast a full-year operating profit instead of a loss.
This was Sony's first upgrade of a forecast since Kazuo Hirai took over as chief executive in 2012 and came after six previous warnings under his watch.
Shares rose 12pc to their highest close since May 2010, after briefly rising 18pc, the maximum allowed for the day. Sony's shares have doubled in value over the past year and are among the top performers on the Tokyo Stock Exchange, although the company is set to book its sixth net loss in seven years.
The results bolstered confidence in Sony's restructuring efforts led by chief financial officer Kenichiro Yoshida, who took the job almost a year ago, said investors and analysts.
After selling its PC business and spinning off its TV operations, Sony is cutting thousands of jobs in its mobile phone business to cope with falling smartphone sales.
It is also spending more on image sensors, used in smartphone cameras and emerging as one of the company's strongest product lines.
Investors have also cited expectations that Mr Yoshida was prepared to sell off or shut down operations that fail to turn profitable through costs cuts.
They will get an update on Sony's thinking when Mr Hirai presents the company's business strategy later this month.
"We like the ongoing consumer electronics exit strategy. And we like the focus on cost-control," said Jefferies analyst Atul Goyal, who called Sony's numbers "the strongest result in the last decade".
Sony's five-year credit default swaps, which show the price of insuring its debt against default, contracted sharply to 91 basis points on Thursday from levels of 100 bps before the outlook announcement, indicating the company's improving credit profile.
The sharp rise in the shares could also be attributed to speculative trading, some investors said.
"Of course the market is recognising the improvement in operating outlook from a loss to a profit but we're seeing a trend of strong reactions to even slight changes, positive or otherwise," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
Shares in Hitachi which gave a weaker-than-expected full-year outlook, fell 10pc yesterday.
Some analysts said the extreme gains and falls suggested that hedge funds were shorting some stocks.