SoftBank Group Corp (SFTBY)

SoftBank is a Japanese investment and holding company which controls assets in a variety of sectors, particularly telecommunications and media. Founder Masayoshi Son's vision, however, extends to investments in ecommerce, AI, and robotics, as well as many other burgeoning fields. SoftBank stock has suffered over the course of a two year period with the stock price falling to its current 22.90 from a high of 49.24 USD in February of 2021. Additionally, despite the company's aforementioned expansive long-term vision, its investments and bets can often prove to be incredibly risky to investors and the company itself. Due to this combination of factors, SoftBank is a sell.

Company Overview

SoftBank has holdings in many different fields, with telecommunications and media being the primary businesses it operates. The company holds Yahoo Japan, the single most visited site in the country, as well as the Sprint Corporation, the fourth-largest telecommunications network in the United States.

The company also has multiple investments in robotics, prosthetic devices, as well as the development of artificial general intelligence through its vision fund, the venture capital arm of SoftBank, one of the largest in the world. The company also has a massive 14% stake in Chinese retail company Alibaba, which it acquired early in the latter's history in 2000, and fintech company PayPal.

Industry Overview

The telecommunications industry is projected to grow at a CAGR of 6.2% in the forecast period from 2023-2030. The Japanese telecom market in particular is expected to grow at a CAGR of 4.8% in the same forecast period. This is quite low compared to the 8-12% CAGR for sustainable large companies and is especially low when compared to the 15-25% percent that is expected of high-risk companies like those of SoftBank.

I view the telecommunications industry as an incredibly complicated and interesting one. A combination of new technologies and innovation made telecom one of the fastest-growing services of the 1990s and 2000s. However, this almost exponential growth in internet penetration in many developed countries has put many companies within the industry at risk.

Competitive Analysis

Since its inception, SoftBank has separated itself for a number of reasons. Firstly, the company has a unique ability to predict trends in a variety of fields. SoftBank's first big breakthrough came during the dot-com era, when the company invested heavily into Yahoo and over 250 other internet start-ups.

SoftBank was also one of the first big investors in Alibaba, a move that helped the company survive into the new millennium. This, along with strategic acquisitions in its core telecommunications market, such as Vodafone Japan and the Sprint Corporation, have positioned the company for seemingly great success.

Key Catalysts

These factors, however, are not what may cause the greatest growth in SoftBank stock over the course of the next few years. Rather, SoftBank's many investments may prove to be the company's saving grace in the long-term. Since 2010, and especially since the launch of the company's Vision fund, SoftBank has put massive amounts of capital into a myriad of ventures, such as ByteDance, FlipKart, 10x Genomics, and Boston Dynamics to name a few.

Companies like the aforementioned ByteDance and FlipKart, as well as others like Uber and Doordash have had impressive growth and returns for SoftBank. The overall fund, however, has invested heavily and quite recklessly in these ventures.

Risks and Concerns

Despite its predictive success and foresight in technology investing, SoftBank's massive losses have largely overshadowed its success and worried investors in many respects. First and foremost, a large number of SoftBank's investments have been very public failures, many of which the company's CEO Masayoshi Son admits to not having been careful enough with.

These investments include companies like WeWork, as well as a majority of SoftBank's pre-2000 holdings. From these assets alone, it is estimated that the company lost over 99% of its revenue over the course of a two-year period from 1999 to 2001 during the dot-com crash.

Financials

SoftBank saw revenue increase by approximately 3.9% YoY to 41.38 billion USD in the fiscal year ending on March 31st, 2021. The majority of that increase came in the distribution sector of the company, with ICT related products and services. The company also saw operating income increase 9.8% YoY to nearly 7.42 billion USD in the same time period.

Conclusion

SoftBank is Japan's largest telecommunications and media company and plays a key role in the venture capital sphere. In spite of their massive successes, including investments like Doordash and UBER, the company's high-profile losses bring forth a troubling implication: randomized eccentricity with the company's massive financial resources as an investing strategy. With a weakening economy, rising interest rates, and general skepticism about tech stocks writ large, SoftBank is not a sustainable long-term investment primarily because it exhibits worrying handlings of its assets.