Sony Corp. shares plunged Thursday after President-CEO Nobuyuki Idei called the stock overvalued — a valid comment by Wall Street reckoning, but not one investors might expect from a company topper.
The stock was battered in Tokyo overnight, and it fell more than 15% — or nearly $38 — in New York to close at $202.38. That’s a hefty dip from a 52-week high of $296 on Dec. 31 when market players, who had been piling into Sony aggressively for months, applauded news of an upcoming stock split.
“You wonder, how can the (head) of a company say this?” asked Jeffrey Pittsburg of Goldis-Pittsburg Institutional Services. “The fact is, I think he’s right.”
End of growth
For Pittsburg and others who follow Sony, the extraordinary thing isn’t so much the stock’s current slump but rather its breathtaking runup from $72 to nearly $300 during the course of 1999.
“We here in America were busy focusing on the wrong things. On how much they were spending on the movie business, on how lousy the music business was,” he said. He said he continued to get Peter Guber-Jon Peters-Sony queries up to 18 months ago. The controversial pair, credited with nearly running Sony Pictures into the ground, joined the company in 1989. Peters left several years later, and Guber exited in 1994.
Leader of the pack
Since then, the Internet and technology sectors have expanded rapidly with Sony at the fore as the biggest “click and mortar” group in the world. “Everything they do, movies, content, cell phones, semiconductors and all hardware is geared to the net,” he added, “and that’s the kind of valuation they were getting. The brand name is golden and PlayStation is raking in the bucks. The stock just got a bit ahead of itself.”
In an interview with Reuters from Tokyo, where Idei made his comments, he valued Sony stock at about $192 given its current earnings, calling anything above that level a “bubble.”
While it may not be worth $300 now, it will be in a year or two, another Wall Streeter noted, predicting the shares would trade in the $150-$200 range for a time and head higher after the two-for-one stock split planned for May. The split — where the number of shares will double and their price drop by half — is viewed as a strong sign of a company’s faith in its prospects and its shares.