We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Audio Video Stocks to Gain From Positive Industry Trends
Read MoreHide Full Article
The Zacks Audio Video Production industry participants are concentrating on the premium segment of the branded products market for business growth. Sony Group Corporation (SONY - Free Report) , Dolby Laboratories (DLB - Free Report) , and LiveOne (LVO - 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 the performance of these companies. However, muted consumer discretionary spending amid weak global macroeconomic conditions is a concern for the 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.
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.
3 Trends Shaping the Future of the Audio-Video Production Industry
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.
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.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #100, which places it in the top 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright 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 two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries results from an upbeat earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. The industry’s loss estimates for 2024 now stand at 68 cents against a loss estimate of $1.08 as of April 30, 2024.
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 gained 8.1% over this period compared with the S&P 500’s growth of 38.4%. The broader sector has surged 20.3% 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 1.27X compared with the S&P 500’s 5.73X. It is below the sector’s trailing 12-month P/S of 2.09X.
In the past five years, the industry has traded as high as 1.86X and as low as 0.83X, with a median of 1.3X, as the chart below shows.
Price-to-Sales TTM Ratio (Past Five Years)
3 Audio Video Production Stocks Keep an Eye on
Dolby Corporation: San Francisco-based Dolby Laboratories specializes in audio noise reduction and audio encoding/compression technologies to transform entertainment and communications at theaters, home, work and mobile devices.
Continued momentum in Dolby Atmos, imaging patents and Dolby Vision is driving Dolby’s performance. Dolby Vision and Dolby Atmos technologies are witnessing rapid adoption in automotive, TV and mobile verticals.
The company continues to focus on strategic acquisitions. In June 2024, it announced the buyout of GE Licensing from GE Aerospace for $429 million in an all-cash transaction. GE Licensing, a leading innovator in patent licensing and management, is a subsidiary of GE Aerospace. With this acquisition, Dolby expects to bolster its intellectual property portfolio through the strategic integration between its existing licensing businesses and GE Licensing's portfolio of video codec technologies (HEVC and VVC).
The deal, likely to close by the end of fiscal 2024, is anticipated to be accretive on a non-GAAP basis to operating margins and EPS in fiscal 2025. Apart from this, the acquisition of THEO Technologies in July 2024, worth $55 million, is aiding its Dolby.io offerings. With THEO, the company plans to address the growing demand for designing customized experiences in sports and entertainment.
The company’s balanced capital deployment strategy and continuous rewards for its shareholders through repurchases and dividend increases are encouraging developments.
However, due to weak demand trends at the box office and the dynamic market environment, the company projects full-year revenues to be down 1-2%, which is trending at the lower end of its guided range.
The Zacks Consensus Estimate for its current-year earnings is pegged at $3.69 per share, unchanged in the past 30 days.
Price and Consensus: DLB
Sony Group Corporation: Headquartered in Tokyo, Japan, Sony Group Corporation designs, manufactures, and sells several consumer and industrial electronic equipment. The company’s product roster comprises audio and video equipment, televisions, network services, game hardware and software, mobile phones, and image sensors. Sony is also active in producing, acquiring, and distributing recorded music and managing and licensing lyrics and music for songs.
Sony is well-positioned to gain from continued strength in the Music, Pictures and Games and Network Services (G&NS) segments. SONY is one of the leading players in the gaming space. In the last reported quarter, G&NS segment sales, which is the largest contributor to SONY’s sales, jumped 12% year over year to ¥864.9 billion. The surge was driven by higher sales from network services, notably PlayStation Plus and rising sales of non-first-party titles, along with favorable forex impacts.
In June 2024, active user accounts on PlayStation were a record 116 million. The company plans to boost the G&NS segment by expanding the stable installed base of PlayStation consoles, enhancing gaming experiences and growing its business by expanding into PCs and improving the first-party software titles. Sony has updated its outlook for the G&NS segment. It now expects sales to be ¥4,320 billion, up from the prior view of ¥4,200 billion, owing to the positive impacts of forex rates.
However, management remains concerned about forex headwinds and the possibility of an economic downturn, especially in the United States.
At present, SONY carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its current-year bottom line is pegged at earnings of 60 cents per share, unchanged in the past seven days.
Price and Consensus: SONY
LivOne: Headquartered in Beverly Hills, CA, LiveOne provides a platform for live stream and on-demand audio, video, and podcast/vodcast content in music, comedy, and pop culture and is the owner of LiveXLive, Slacker Radio, PodcastOne, and React Presents, among others.
The robust LiveOne audio business, including Slacker Radio and PodcastOne, drives the company’s performance. The audio business is witnessing growth in paid members through partnerships, advertising and sponsorships. Synergies from acquisitions and cost-containment efforts bode well.
For the three months ended June 2024, Slacker Radio recorded net sales of $18.7 million, driven by robust growth of B2B deals. LVO remains focused on B2B partnerships that now include four new major deals and 63 potential ones in the pipeline. LVO also clinched a $24 million partnership with a top streaming network, a Fortune 250 company, which is currently generating around $2 million in monthly revenues.
Recently, LVO announced an updated partnership with Tesla. As part of this agreement, which was inked at the beginning of October 2024, Tesla has permanently replaced its streaming button with LiveOne's service, marking a significant shift in the user experience for Tesla owners. However, beginning Dec. 1, 2024, Tesla will stop subsidizing LiveOne products for some customers. Despite this change, LiveOne plans to offer discounted music packages specifically for all Tesla owners. The company has revised its guidance for consolidated fiscal 2025 revenues, lowering the forecast to between $120 million and $135 million from the previous estimate of $140 million to $155 million.
Currently, LVO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at a loss of 2 cents, unchanged in the past 60 days.
Price and Consensus: LVO
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Audio Video Stocks to Gain From Positive Industry Trends
The Zacks Audio Video Production industry participants are concentrating on the premium segment of the branded products market for business growth. Sony Group Corporation (SONY - Free Report) , Dolby Laboratories (DLB - Free Report) , and LiveOne (LVO - 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 the performance of these companies. However, muted consumer discretionary spending amid weak global macroeconomic conditions is a concern for the 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.
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.
3 Trends Shaping the Future of the Audio-Video Production Industry
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.
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.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #100, which places it in the top 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright 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 two to one.
The industry’s positioning in the top 50% of the Zacks-ranked industries results from an upbeat earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. The industry’s loss estimates for 2024 now stand at 68 cents against a loss estimate of $1.08 as of April 30, 2024.
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 gained 8.1% over this period compared with the S&P 500’s growth of 38.4%. The broader sector has surged 20.3% 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 1.27X compared with the S&P 500’s 5.73X. It is below the sector’s trailing 12-month P/S of 2.09X.
In the past five years, the industry has traded as high as 1.86X and as low as 0.83X, with a median of 1.3X, as the chart below shows.
Price-to-Sales TTM Ratio (Past Five Years)
3 Audio Video Production Stocks Keep an Eye on
Dolby Corporation: San Francisco-based Dolby Laboratories specializes in audio noise reduction and audio encoding/compression technologies to transform entertainment and communications at theaters, home, work and mobile devices.
Continued momentum in Dolby Atmos, imaging patents and Dolby Vision is driving Dolby’s performance. Dolby Vision and Dolby Atmos technologies are witnessing rapid adoption in automotive, TV and mobile verticals.
The company continues to focus on strategic acquisitions. In June 2024, it announced the buyout of GE Licensing from GE Aerospace for $429 million in an all-cash transaction. GE Licensing, a leading innovator in patent licensing and management, is a subsidiary of GE Aerospace. With this acquisition, Dolby expects to bolster its intellectual property portfolio through the strategic integration between its existing licensing businesses and GE Licensing's portfolio of video codec technologies (HEVC and VVC).
The deal, likely to close by the end of fiscal 2024, is anticipated to be accretive on a non-GAAP basis to operating margins and EPS in fiscal 2025. Apart from this, the acquisition of THEO Technologies in July 2024, worth $55 million, is aiding its Dolby.io offerings. With THEO, the company plans to address the growing demand for designing customized experiences in sports and entertainment.
The company’s balanced capital deployment strategy and continuous rewards for its shareholders through repurchases and dividend increases are encouraging developments.
However, due to weak demand trends at the box office and the dynamic market environment, the company projects full-year revenues to be down 1-2%, which is trending at the lower end of its guided range.
At present, Dolby carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for its current-year earnings is pegged at $3.69 per share, unchanged in the past 30 days.
Price and Consensus: DLB
Sony is well-positioned to gain from continued strength in the Music, Pictures and Games and Network Services (G&NS) segments. SONY is one of the leading players in the gaming space. In the last reported quarter, G&NS segment sales, which is the largest contributor to SONY’s sales, jumped 12% year over year to ¥864.9 billion. The surge was driven by higher sales from network services, notably PlayStation Plus and rising sales of non-first-party titles, along with favorable forex impacts.
In June 2024, active user accounts on PlayStation were a record 116 million. The company plans to boost the G&NS segment by expanding the stable installed base of PlayStation consoles, enhancing gaming experiences and growing its business by expanding into PCs and improving the first-party software titles. Sony has updated its outlook for the G&NS segment. It now expects sales to be ¥4,320 billion, up from the prior view of ¥4,200 billion, owing to the positive impacts of forex rates.
However, management remains concerned about forex headwinds and the possibility of an economic downturn, especially in the United States.
At present, SONY carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its current-year bottom line is pegged at earnings of 60 cents per share, unchanged in the past seven days.
Price and Consensus: SONY
The robust LiveOne audio business, including Slacker Radio and PodcastOne, drives the company’s performance. The audio business is witnessing growth in paid members through partnerships, advertising and sponsorships. Synergies from acquisitions and cost-containment efforts bode well.
For the three months ended June 2024, Slacker Radio recorded net sales of $18.7 million, driven by robust growth of B2B deals. LVO remains focused on B2B partnerships that now include four new major deals and 63 potential ones in the pipeline. LVO also clinched a $24 million partnership with a top streaming network, a Fortune 250 company, which is currently generating around $2 million in monthly revenues.
Recently, LVO announced an updated partnership with Tesla. As part of this agreement, which was inked at the beginning of October 2024, Tesla has permanently replaced its streaming button with LiveOne's service, marking a significant shift in the user experience for Tesla owners. However, beginning Dec. 1, 2024, Tesla will stop subsidizing LiveOne products for some customers. Despite this change, LiveOne plans to offer discounted music packages specifically for all Tesla owners. The company has revised its guidance for consolidated fiscal 2025 revenues, lowering the forecast to between $120 million and $135 million from the previous estimate of $140 million to $155 million.
Currently, LVO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at a loss of 2 cents, unchanged in the past 60 days.
Price and Consensus: LVO