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3 Audio Video Stocks to Keep an Eye on Amid Industry Headwinds
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Muted consumer discretionary spending amid weak global macroeconomic conditions is a concern for the Zacks Audio Video Production industry participants. A highly-promotional environment and stiff competition from importers of comparatively low-priced devices are denting margins. Online accessibility of recording equipment and the availability of distribution channels on the Internet are additional headwinds. Nonetheless, industry participants are concentrating on the premium segment of the branded products market for business growth. Sony Group Corporation (SONY - Free Report) , Panasonic Holdings Corporation (PCRHY - Free Report) and Sonos Inc (SONO - Free Report) are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. Easing of supply chain issues is likely to aid performance of these companies.
Industry Description
The Zacks Audio Video Production industry comprises television, speaker, video player and camcorder manufacturers. It includes companies that offer gaming consoles, drones and high-end cameras for individuals and industrial markets. These firms provide state-of-the-art audio, imaging and voice technologies that enhance entertainment and communication experiences. Some industry participants develop audio and imaging products, including digital cinema servers and products for film production and entertainment industries. Apart from providing theatrical and television production services for cinema exhibitions, broadcast and home entertainment, these companies work with film studios, content creators, broadcasters and video game designers. Some prominent players are present in the music and image-based software markets worldwide.
What's Shaping the Future of the Audio-Video Production Industry?
Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness and inflationary pressure are likely to keep consumer spending, especially discretionary purchases, in check. While the companies keep investing for market share gains and supply chain resilience, a shortage of critical hardware components due to volatile supply chain dynamics is expected to hurt revenues in the near term. Fluctuations in commodity pricing for different components are additional concerns. Elevated promotional activity to boost sales amid weak spending is also affecting the performance of these industry participants.
Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are the most popular electronic devices among customers. However, U.S.-based manufacturers of audio and video systems face intense competition from importers of comparatively low-priced devices, particularly from China, Vietnam and Mexico. These firms face stiff competition across all end markets, often leading to intense price wars and margin contraction.
Technological Advancement to Spur Growth: Over the years, the shift to digital technology catered to the demand for high-resolution video and reduced the problems of radio frequency and electromagnetic interference, making audio-visual systems more data-network friendly. Wireless transmission has enabled the seamless broadcast of audio and video signals through wireless data networks while enhancing productivity. Industry players have been offering services to diverse media producers. That said, easy online accessibility of recording equipment and the widespread availability of distribution channels on the Internet are hurdles.
Increasing Demand for Premium Entertainment: The industry performed well despite drastic changes in how media is consumed and distributed. The rise in demand for premium entertainment from record labels, TV producers, and advertisers is likely to stoke profitable growth. Demand for video post-production services will increase in the coming days as the downstream market continues to grow. Strong demand across all regions with a more direct-to-consumer, subscription-centric model bodes well for the industry participants.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #169, which places it in the bottom 33% of more than 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few audio-video production stocks you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms the Sector and S&P 500
The Zacks Audio Video Production industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.
The industry has lost 9.9% over this period against the S&P 500’s increase of 15%. The broader sector has lost 6.2% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
Price-to-sales is commonly used for valuing audio-video production stocks. The industry has a trailing 12-month P/S of 0.90X compared with the S&P 500’s 5.52X. It is below the sector’s trailing 12-month P/S of 1.74X.
In the past five years, the industry has traded as high as 1.46X and as low as 0.67X with a median of 1.02X, as the chart below shows.
Price-to-Sales TTM Ratio (Past Five Years)
3 Audio Video Production Stocks to Add to Watchlist
Panasonic Holdings Corporation: Japan-based Panasonic is a worldwide leader in the development and manufacture of electronic products for a wide range of consumer, business and industrial needs.
The company’s Automotive segment is benefiting from favorable forex movement amid a production slowdown in the sector. Increased sales of Avionics, Process Automation in China, and Gemba Solutions are major tailwinds for the Connect business segment. Higher sales of products for generative AI servers and ICT terminals are driving revenues for its Industry segment. In the last reported quarter, revenues from Automotive, Connect, and Industry were up 7%, 13% and 10%, respectively. However, weakening sales of industrial-use relays in Europe and China and sales of automotive batteries are a concern.
The consensus estimate for its current-year earnings is pegged at 97 cents, unchanged in the past 30 days. The long-term EPS growth rate stands at 17.6%.
Price and Consensus: PCRHY
Sony Group Corporation: Headquartered in Tokyo, Japan, Sony designs, manufactures and sells several consumer and industrial electronic equipment. Sony is also active in the production, acquisition and distribution of recorded music and the management and licensing of lyrics and music for songs.
Sony is well-positioned to gain from continued strength in the Music, Pictures and Imaging & Sensing Solutions (I&SS) segments. The Music segment’s results are powered by higher recorded music and music publishing sales from paid subscription streaming services. The I&SS segment is gaining from the rise in sales of image sensors for mobile products. However, Sony expects 2024 revenues to be affected by a slowdown in the Entertainment, Technology & Services and Games & Network segments. The company expects to sell about 18 million units of its PlayStation 5 in the fiscal 2024, down from 20.8 million units sold in the fiscal 2023. For the fiscal year ending Mar 31, 2025, SONY expects sales of ¥12,310 billion, down 5% year over year.
At present, SONY carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its current-year bottom line is pegged at earnings of $5.64 per share, up 1.1% in the past 30 days.
Price and Consensus: SONY
Sonos: Headquartered in Santa Barbara, CA, Sonos operates as a consumer electronics company that is primarily involved in the manufacturing of speakers with immersive sound experiences.
Sonos’ performance is benefiting from a diverse product mix and lower component costs. The company expects the fiscal 2024 gross margin to gain from lower component costs, a favorable product mix, fewer spot component purchases and lower excess component provisions. Sonos also expects to generate more than $100 million from product launches in the fiscal 2024. Management reiterated its revenue guidance for the fiscal 2024. However, the company is adversely impacted by weak sales across all the regions as most of its product categories remain under pressure. Cautious discretionary spending amid macroeconomic challenges, especially in EMEA and APAC and elevated promotional activity pose headwinds for the company. Intensified competition and higher research and development expenses are additional concerns. Currently, SONO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at 86 cents, unchanged in the past 60 days.
Price and Consensus: SONO
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3 Audio Video Stocks to Keep an Eye on Amid Industry Headwinds
Muted consumer discretionary spending amid weak global macroeconomic conditions is a concern for the Zacks Audio Video Production industry participants. A highly-promotional environment and stiff competition from importers of comparatively low-priced devices are denting margins. Online accessibility of recording equipment and the availability of distribution channels on the Internet are additional headwinds. Nonetheless, industry participants are concentrating on the premium segment of the branded products market for business growth. Sony Group Corporation (SONY - Free Report) , Panasonic Holdings Corporation (PCRHY - Free Report) and Sonos Inc (SONO - Free Report) are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. Easing of supply chain issues is likely to aid performance of these companies.
Industry Description
The Zacks Audio Video Production industry comprises television, speaker, video player and camcorder manufacturers. It includes companies that offer gaming consoles, drones and high-end cameras for individuals and industrial markets. These firms provide state-of-the-art audio, imaging and voice technologies that enhance entertainment and communication experiences. Some industry participants develop audio and imaging products, including digital cinema servers and products for film production and entertainment industries. Apart from providing theatrical and television production services for cinema exhibitions, broadcast and home entertainment, these companies work with film studios, content creators, broadcasters and video game designers. Some prominent players are present in the music and image-based software markets worldwide.
What's Shaping the Future of the Audio-Video Production Industry?
Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness and inflationary pressure are likely to keep consumer spending, especially discretionary purchases, in check. While the companies keep investing for market share gains and supply chain resilience, a shortage of critical hardware components due to volatile supply chain dynamics is expected to hurt revenues in the near term. Fluctuations in commodity pricing for different components are additional concerns. Elevated promotional activity to boost sales amid weak spending is also affecting the performance of these industry participants.
Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are the most popular electronic devices among customers. However, U.S.-based manufacturers of audio and video systems face intense competition from importers of comparatively low-priced devices, particularly from China, Vietnam and Mexico. These firms face stiff competition across all end markets, often leading to intense price wars and margin contraction.
Technological Advancement to Spur Growth: Over the years, the shift to digital technology catered to the demand for high-resolution video and reduced the problems of radio frequency and electromagnetic interference, making audio-visual systems more data-network friendly. Wireless transmission has enabled the seamless broadcast of audio and video signals through wireless data networks while enhancing productivity. Industry players have been offering services to diverse media producers. That said, easy online accessibility of recording equipment and the widespread availability of distribution channels on the Internet are hurdles.
Increasing Demand for Premium Entertainment: The industry performed well despite drastic changes in how media is consumed and distributed. The rise in demand for premium entertainment from record labels, TV producers, and advertisers is likely to stoke profitable growth. Demand for video post-production services will increase in the coming days as the downstream market continues to grow. Strong demand across all regions with a more direct-to-consumer, subscription-centric model bodes well for the industry participants.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #169, which places it in the bottom 33% of more than 251 Zacks industries.
The group’s Zacks Industry Rank, which is the average Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few audio-video production stocks you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms the Sector and S&P 500
The Zacks Audio Video Production industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.
The industry has lost 9.9% over this period against the S&P 500’s increase of 15%. The broader sector has lost 6.2% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
Price-to-sales is commonly used for valuing audio-video production stocks. The industry has a trailing 12-month P/S of 0.90X compared with the S&P 500’s 5.52X. It is below the sector’s trailing 12-month P/S of 1.74X.
In the past five years, the industry has traded as high as 1.46X and as low as 0.67X with a median of 1.02X, as the chart below shows.
Price-to-Sales TTM Ratio (Past Five Years)
3 Audio Video Production Stocks to Add to Watchlist
Panasonic Holdings Corporation: Japan-based Panasonic is a worldwide leader in the development and manufacture of electronic products for a wide range of consumer, business and industrial needs.
The company’s Automotive segment is benefiting from favorable forex movement amid a production slowdown in the sector. Increased sales of Avionics, Process Automation in China, and Gemba Solutions are major tailwinds for the Connect business segment. Higher sales of products for generative AI servers and ICT terminals are driving revenues for its Industry segment. In the last reported quarter, revenues from Automotive, Connect, and Industry were up 7%, 13% and 10%, respectively. However, weakening sales of industrial-use relays in Europe and China and sales of automotive batteries are a concern.
Currently, PCRHY carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for its current-year earnings is pegged at 97 cents, unchanged in the past 30 days. The long-term EPS growth rate stands at 17.6%.
Price and Consensus: PCRHY
Sony is well-positioned to gain from continued strength in the Music, Pictures and Imaging & Sensing Solutions (I&SS) segments. The Music segment’s results are powered by higher recorded music and music publishing sales from paid subscription streaming services. The I&SS segment is gaining from the rise in sales of image sensors for mobile products. However, Sony expects 2024 revenues to be affected by a slowdown in the Entertainment, Technology & Services and Games & Network segments. The company expects to sell about 18 million units of its PlayStation 5 in the fiscal 2024, down from 20.8 million units sold in the fiscal 2023. For the fiscal year ending Mar 31, 2025, SONY expects sales of ¥12,310 billion, down 5% year over year.
At present, SONY carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its current-year bottom line is pegged at earnings of $5.64 per share, up 1.1% in the past 30 days.
Price and Consensus: SONY
Sonos: Headquartered in Santa Barbara, CA, Sonos operates as a consumer electronics company that is primarily involved in the manufacturing of speakers with immersive sound experiences.
Sonos’ performance is benefiting from a diverse product mix and lower component costs. The company expects the fiscal 2024 gross margin to gain from lower component costs, a favorable product mix, fewer spot component purchases and lower excess component provisions. Sonos also expects to generate more than $100 million from product launches in the fiscal 2024. Management reiterated its revenue guidance for the fiscal 2024. However, the company is adversely impacted by weak sales across all the regions as most of its product categories remain under pressure. Cautious discretionary spending amid macroeconomic challenges, especially in EMEA and APAC and elevated promotional activity pose headwinds for the company. Intensified competition and higher research and development expenses are additional concerns. Currently, SONO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at 86 cents, unchanged in the past 60 days.
Price and Consensus: SONO