Sony: Sell Rating Reiterated

We believe Sony Corporation (SNE) will continue to struggle as it faces competition from other innovative digital products and increasing competition from low-cost Asian manufacturers as the consumer market slows.

The company’s Q2 results were disappointing, and SNE trimmed its forecast for the remainder of 2008 with lower operating income due to sluggish sales in the electronics and the games segments. Deterioration in the Japanese stock market, a weak global economy, an intensifying price competition, and a strong yen are to blame.

We therefore maintain a Sell recommendation on Sony shares and cut our six-month price target to $21.00. This reflects a P/E multiple of approximately 14.7x our estimated fiscal 2008 EPADR of $1.43, which we believe is a reasonable valuation for a company in Sony’s position.

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