Investing.com– Citi cut its price target on Sony Corp (TYO:6758) and reiterated its Neutral rating on the stock, stating that the new iPhone- which uses Sony’s camera sensors- was not selling as well as expected.
Citi also said that the recently announced Playstation 5 Pro model will provide a limited boost to sales.
Citi cut Sony’s target price to 2,800 yen from 2,840 yen.
The brokerage said that while Sony (NYSE:SONY) dominated the mobile camera sensor market, its operating profit margins for CMOS image sensors were still capped at 20%, due to hefty capital expenditures and research expenses.
“2024 iPhone models are not selling as well as the market expected, and more and more bearish opinions are emerging,” Citi analysts wrote in a note. A slew of recent reports and projections said Apple Inc’s (NASDAQ:AAPL) iPhone was not selling as well as initially anticipated, with Apple’s staggered introduction of artificial intelligence features doing little to draw in consumers.
Sony was an exclusive supplier of camera technology to Apple until 2024, although reports earlier this year suggested that Apple was also considering sourcing sensors from Samsung Electronics Co Ltd (KS:005930).
Citi said that while the PS5 Pro presented better margins for Sony, sales of the new model were likely to be “modest,” due to its high launch price.
“We expect the new PlayStation model, which will be sold alongside previous models, to account for only 5%-10% of total sales,” Citi analysts said.
Analysts said they did not expect major earnings contribution from first-party games.
Sony’s PS5 Pro unveil was perceived negatively by the gaming community, with criticism directed largely at its high price tag, lack of major first-party games and middling performance improvements.