Sony Looks to the Future: Can It Become a $1 Trillion Company?

Sony (NYSE: SONY) ranks among the biggest names in gaming, film, and music publishing. Alongside consumer electronics and image sensors, the company plans to spin off its financial services group in the coming years.

Over the last decade, Sony’s stock has seen a remarkable increase of nearly 430%. However, with a market cap of $110 billion, it remains significantly less valuable than Walt Disney, valued at $176 billion, and Microsoft, which boasts a market cap of $3.1 trillion. Is it feasible for Sony’s stock to soar more than ninefold and reach the trillion-dollar mark by the decade’s end?

Image source: Getty Images.

Breaking Down Sony’s Diverse Business

In fiscal 2023, which concluded in March 2024, 33% of Sony’s net sales came from its game and network services (G&NS) division. This includes the PlayStation consoles, games, and related offerings. The entertainment, technology, and services (ET&S) division contributed 19% to net sales, focusing on cameras, personal entertainment devices, and other electronics.

Both divisions experience cyclical trends. As we near the PS5’s fourth anniversary in November 2020, the gaming sector is showing signs of a slowdown. Additionally, sales of new cameras and entertainment devices in the ET&S sector have faltered.

Meanwhile, the music segment, which includes Sony Music’s publishing, accounted for 12% of sales last year. The pictures segment, which produces TV shows and movies, generated another 11%. While these media ventures can be unpredictable due to their reliance on hit productions, they have stabilized somewhat through licensing agreements with streaming platforms.

Furthermore, Sony’s imaging and sensing solutions (I&SS) division, which fabricates image sensors, provided another 12% of sales. This division often fluctuates in association with the smartphone industry’s performance. The company’s financial services division has traditionally contributed to sales but is set for a spinoff next year.

Assessing Sony’s Growth Prospects

From fiscal 2013 to fiscal 2023, Sony’s revenue increased at a compound annual growth rate (CAGR) of 5%. This growth stemmed primarily from consistent improvements in its G&NS, music, and pictures segments, which helped cushion the cyclical challenges in the I&SS division and the slow growth of the ET&S sector.

Over the past decade, Sony has streamlined its consumer electronics division by winding down its PC business, spinning off its TV business, and reducing its smartphone operations. A noteworthy partnership with Disney linked its Spider-Man films to Marvel’s popular Cinematic Universe, raising speculation about possibly selling film rights to Disney for a significant cash infusion in the future.

Looking ahead, uncertainty surrounds Sony’s G&NS division as company leaders revealed earlier this year that PS5 sales have not met expectations and that the product is entering “the latter stage of its life cycle.” The company is also transitioning more of its self-published games to Windows PCs.

Most market analysts forecast the launch of the PS6 in 2027 or 2028, although it’s uncertain whether this console will achieve greater success compared to the PS5. If the PS6 does not perform well, Sony may need to broaden its gaming strategy by releasing games on additional platforms or enhancing its cloud gaming services.

The launch of the PS6 is likely to coincide with Sony’s spinoff of its financial services division over the next two to three years. The company intends to distribute approximately 80% of this division’s shares to investors via special dividends, potentially making Sony more appealing for income-focused investors, especially given its current forward dividend yield of 0.6%.

Can Sony Reach a Trillion-Dollar Valuation?

From fiscal 2023 to fiscal 2026, analysts predict Sony’s revenue will remain stable as it separates from its financial services division. They anticipate an EPS growth rate of 7% during this period as the company capitalizes on the spinoff and bolsters its core businesses.

If Sony meets these projections, continues to achieve a modest EPS growth of 5% from fiscal 2026 to fiscal 2031, and maintains a valuation of 16 times forward earnings, its stock could see an increase of nearly 50% by 2030. A rebound in the Japanese yen against the U.S. dollar could further amplify gains.

However, even if Sony’s market cap doubles, it would still only reach $220 billion, suggesting that joining the trillion-dollar club by the decade’s end is highly unlikely. Nevertheless, it remains a balanced investment option for those seeking exposure to the gaming, media, chip manufacturing, and consumer electronics sectors.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Walt Disney. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.