In addition to cameras, Sony Corporation (ADR) (NYSE:SNE) produces a wide variety of electronics that includes laptops, televisions, and the soon to be released PlayStation 4. The company also owns a few film studios, operates a bank and securities brokerage firm online, and provides life insurance.
Valued at $20.9 billion, Sony Corporation (ADR) (NYSE:SNE) is simultaneously sending out signals to buy and sell its stock. Let’s start with the bad. Sony Corporation (ADR) (NYSE:SNE)’s lowest sales, in terms of yen, in the past decade came in 2012. The company posted net losses during the entire 2009-2012 period. On top of that Sony has a working capital deficit of $6.74 billion.
The company’s net losses in 2009-2012 are disconcerting for investors. But negative net income is not always a sign that a company is bleeding money. During 2009-2012 Sony generated $6.5 billion a year on average in operating cash flow while it was posting net losses.
Sony Corporation (ADR) (NYSE:SNE) generates nearly one-third of its revenue in Japan, meaning the company’s fortunes are very much linked to the success or failure of the economic policies of prime minister Shinzo Abe. In the past few years, the company’s sales in America and, not surprisingly, China have declined precipitously.
Analysts, whose job it is to cover the stock, are bulls. Two price targets have been promulgated by such analysts, one of $25.89 and the other $27.80. Even the low number of $25.89 represents substantial upside from today’s prices.
Foolish final thoughts
Canon Inc. (ADR) (NYSE:CAJ) is a company I would personally avoid. A transition away from traditional digital cameras isn’t necessarily what’s killing the company. Sales of its printers and other office equipment, which appear to have peaked in the mid 2000’s, have been falling for the last few years.
Sony posted net losses during 2009-2012 and has a sizable working capital deficit. Throughout the turmoil of the past few years, the company has continued to generate copious amounts of cash.
But for a pure play in digital cameras, I like Nikon. Sales have grown despite the decline in traditional digital cameras thanks to a focus on cameras with interchangeable lenses. On a working capital basis, Nikon is cheaper than most companies. If sales and profits continue growing, which management predicts they will, Nikon has a good chance of being a profitable investment.
The article Are These Camera Stocks Headed for a Kodak Moment? originally appeared on Fool.com and is written by Ryan Palmer.
Fool blogger Ryan Palmer has no position in any of the stocks mentioned in this article. The Motley Fool does not recommend any of the stocks mentioned in this article. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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