Is the Worst Over for Sony's Stock?

Sony's (SNE) ordinary shares (Tokyo: 6758) gained 3.7% in Friday trading to finish a strong week in which its shares rebounded 6.7% for their highest close in two weeks.

As I noted yesterday in "Sony: Fitch Downgrade Overshadowed by Sony Ericsson Earnings," it looks like all negative factors regarding such Sony woes as its massive notebook PC battery recall and PS3 delays and supply issues have been factored in. What really jump started its shares in the face of Fitch's report was the stellar earnings announcement by Sony Ericsson. And hopefully I'm not repeating myself too much from yesterday, but the weak yen is seen as a big plus for exporter stocks too.

Now, a bullish signal for Sony is Morgan Stanley's upgrade of Sony today from "equal-weight" to "over-weight" with a revised target to 5,900 yen ($49.34) from 5,600 yen ($46.83). Looking ahead to 2007 and beyond, MS sees Sony's earnings improving but not being sufficiently valued in its stock price.

Newratings.com cites MS analyst Masahiro Ono saying:

"The price premium earned by the Sony brand has not fallen in the past year. If anything, BRAVIA LCD TVs seem to be restoring it. With flat-screen TV penetration spreading in 2008, we still expect a strong earnings recovery."

Note on the 3rd of this month Goldman Sachs downgraded Sony to "neutral" from "buy" cutting its target to 5,150 yen ($43.06) from 5,600 yen ($46.83).

Sony's ordinary shares closed Friday at 4,760 yen ($39.80). Its ADRs gained 1% yesterday to close at $39.05.

Sony Corp (SNE) 1-year chart:

Related links: More commentary on Sony's stock.

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Disclosure: I do not own shares of Sony