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4 Audio Video Stocks That Are Braving Industry Challenges
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The pandemic is still affecting companies in the Zacks Audio Video Production industry. Declining consumer demand and supply chain disruptions pose major concerns. Also, fierce competition from importers of comparatively low-priced devices continues to weigh on these industry players. Online accessibility of recording equipment and the availability of distribution channels on the Internet remain headwinds.
Nevertheless, the companies 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) , Sonos (SONO - Free Report) and GoPro (GPRO - Free Report) are likely to benefit from investments in cutting-edge technology solutions that create better communications experience.
Industry Description
The Zacks Audio Video Production industry comprises manufacturers of televisions, speakers, video players and camcorders. It includes companies that offer gaming consoles, drones and high-end cameras for individuals and industrial markets around the world. These firms provide state-of-the-art audio, imaging and voice technologies that enhance entertainment and communication experiences. Some industry participants also design and develop audio and imaging products, including digital cinema servers as well as products for film production, cinema and entertainment industries.
Apart from providing a host of services for theatrical and television production for cinema exhibition, broadcast and home entertainment, these companies work with film studios, content creators, post-production facilities, cinema operators, broadcasters as well as video game designers. Some prominent players even have presence in the music and image-based software markets worldwide.
What’s Shaping the Future of Audio Video Production Industry
Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are the most popular electronic devices among customers. But the U.S. manufacturers of audio and video systems continue to face intense competition from importers of comparatively low-priced devices, particularly from China, Vietnam and Mexico. The firms face stiff competition across all end markets, which often leads to intense price wars and margin contraction. Also, a decline in picture and music sales has taken a heavy toll on the industry. Nevertheless, the companies are likely to benefit from investments in cutting-edge technology solutions that create a seamless communications experience.
Changing Consumer Preferences: Rapid changes due to the technological obsolescence of products lead to a plethora of challenges, as the ecosystem continues to transform in the digital age. The fast-evolving industry has called for innovation, which necessitates the participants to continuously come up with ground-breaking technology to stay ahead of the curve. Keeping up with changing consumer preferences, licensee demand, shifting standards makes the industry vulnerable to operating risks. While the companies are coming up with compelling offerings to broaden their customer base, they face risks associated with new product development.
Pandemic Continues to Hurt Businesses: The pandemic continues to deal a blow to the industry, with companies seeing a substantial decline in cinema product sales. Theater closures and lower sales for television productions are impairing the overall performance. While the companies keep investing for market share gains and supply chain resilience, a shortage of critical hardware components due to supply chain disruptions is expected to hurt their revenues in the near term. Unit volume shipments across end markets and devices are expected to decline. Fluctuations in commodity pricing for different components pose another concern.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #195, which places it at the bottom 22% 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 weak near-term prospects. Interestingly, 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.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is an outcome of a negative earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since the past month, the industry’s earnings estimates for the current year and the next have decreased 0.8% and 0.9%, respectively.
Before we present a few audio-video production stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms Sector, S&P 500
The Zacks Audio Video Production industry has outperformed both the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.
The industry has returned 51.9% over this period compared with the S&P 500’s rise of 41.2%. The broader sector has gained 36.4%.
One-Year Price Performance
Industry’s Current Valuation
Price-to-Sales is commonly used for valuing audio-video production stocks. The industry currently has a forward 12-month P/S of 1.21X compared with the S&P 500’s 4.66X. It is also below the sector’s forward 12-month P/S of 2.71X.
Over the past five years, the industry has traded as high as 1.23X and as low as 0.13X with a median of 0.7X, as the chart below shows.
Price-to-Sales F12M Ratio (Past Five Years)
4 Audio Video Production Stocks to Watch
Sony Group: Headquartered in Tokyo, Japan, Sony produces and sells electronic equipment and devices for the consumer and industrial markets worldwide. Of late, the company is benefiting from a substantial increase in sales in the Game & Network Services and Financial Services segments. It expanded its 360 Reality Audio services and product offerings, adding new video streaming capabilities and content creation tools. It also unveiled the Airpeak aircraft as part of its drone project in artificial intelligence robotics. By bringing together its cutting-edge technologies, the company intends to contribute to the evolution of mobility for safety and in-car entertainment. These developments are likely to aid Sony’s performance, going forward. The Zacks Consensus Estimate for its current-year earnings has been revised 2.1% upward over the past 30 days. The stock has gained 53.2% in the past year. It currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: SONY
Dolby: Headquartered in San Francisco, CA, Dolby creates audio and imaging technologies that enable spectacular experiences. The company is seeing growing momentum in Dolby content through its partnerships. Dolby has also expanded its reach within music and gaming. The consensus estimate for its current-year earnings has been revised 8.6% upward over the past 30 days. The stock has moved up 64.9% in the past year. It carries a Zacks Rank #2 (Buy).
Price and Consensus: DLB
Sonos: Headquartered in Santa Barbara, CA, Sonos is one of the world’s leading sound experience brands. The company is focused on delivering innovative products and services, strengthening its direct-to-consumer efforts. It is well positioned to deliver significant free cash flow and increased shareholder value over the long term. The consensus mark for its current-year earnings has been revised 9% upward over the past 30 days. The stock has returned a whopping 199.2% in the past year. It carries a Zacks Rank #3.
Price and Consensus: SONO
GoPro: Headquartered in San Mateo, CA, GoPro sells cameras, drones and wearable accessories in the United States and globally. The company has evolved from a hardware unit-sales-centric business to a direct-to-consumer subscription-centric business. In April 2021, GoPro subscribers surpassed 1 million. GoPro launched its new Quik App and made it available to smartphone users via an annual subscription. The consensus estimate for its current-year earnings has been revised 1.7% upward over the past 30 days. The stock has soared 142.5% in the past year. It carries a Zacks Rank #3.
Price and Consensus: GPRO
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Image: Bigstock
4 Audio Video Stocks That Are Braving Industry Challenges
The pandemic is still affecting companies in the Zacks Audio Video Production industry. Declining consumer demand and supply chain disruptions pose major concerns. Also, fierce competition from importers of comparatively low-priced devices continues to weigh on these industry players. Online accessibility of recording equipment and the availability of distribution channels on the Internet remain headwinds.
Nevertheless, the companies 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) , Sonos (SONO - Free Report) and GoPro (GPRO - Free Report) are likely to benefit from investments in cutting-edge technology solutions that create better communications experience.
Industry Description
The Zacks Audio Video Production industry comprises manufacturers of televisions, speakers, video players and camcorders. It includes companies that offer gaming consoles, drones and high-end cameras for individuals and industrial markets around the world. These firms provide state-of-the-art audio, imaging and voice technologies that enhance entertainment and communication experiences. Some industry participants also design and develop audio and imaging products, including digital cinema servers as well as products for film production, cinema and entertainment industries.
Apart from providing a host of services for theatrical and television production for cinema exhibition, broadcast and home entertainment, these companies work with film studios, content creators, post-production facilities, cinema operators, broadcasters as well as video game designers. Some prominent players even have presence in the music and image-based software markets worldwide.
What’s Shaping the Future of Audio Video Production Industry
Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are the most popular electronic devices among customers. But the U.S. manufacturers of audio and video systems continue to face intense competition from importers of comparatively low-priced devices, particularly from China, Vietnam and Mexico. The firms face stiff competition across all end markets, which often leads to intense price wars and margin contraction. Also, a decline in picture and music sales has taken a heavy toll on the industry. Nevertheless, the companies are likely to benefit from investments in cutting-edge technology solutions that create a seamless communications experience.
Changing Consumer Preferences: Rapid changes due to the technological obsolescence of products lead to a plethora of challenges, as the ecosystem continues to transform in the digital age. The fast-evolving industry has called for innovation, which necessitates the participants to continuously come up with ground-breaking technology to stay ahead of the curve. Keeping up with changing consumer preferences, licensee demand, shifting standards makes the industry vulnerable to operating risks. While the companies are coming up with compelling offerings to broaden their customer base, they face risks associated with new product development.
Pandemic Continues to Hurt Businesses: The pandemic continues to deal a blow to the industry, with companies seeing a substantial decline in cinema product sales. Theater closures and lower sales for television productions are impairing the overall performance. While the companies keep investing for market share gains and supply chain resilience, a shortage of critical hardware components due to supply chain disruptions is expected to hurt their revenues in the near term. Unit volume shipments across end markets and devices are expected to decline. Fluctuations in commodity pricing for different components pose another concern.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #195, which places it at the bottom 22% 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 weak near-term prospects. Interestingly, 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.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is an outcome of a negative earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since the past month, the industry’s earnings estimates for the current year and the next have decreased 0.8% and 0.9%, respectively.
Before we present a few audio-video production stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms Sector, S&P 500
The Zacks Audio Video Production industry has outperformed both the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.
The industry has returned 51.9% over this period compared with the S&P 500’s rise of 41.2%. The broader sector has gained 36.4%.
One-Year Price Performance
Industry’s Current Valuation
Price-to-Sales is commonly used for valuing audio-video production stocks. The industry currently has a forward 12-month P/S of 1.21X compared with the S&P 500’s 4.66X. It is also below the sector’s forward 12-month P/S of 2.71X.
Over the past five years, the industry has traded as high as 1.23X and as low as 0.13X with a median of 0.7X, as the chart below shows.
Price-to-Sales F12M Ratio (Past Five Years)
4 Audio Video Production Stocks to Watch
Sony Group: Headquartered in Tokyo, Japan, Sony produces and sells electronic equipment and devices for the consumer and industrial markets worldwide. Of late, the company is benefiting from a substantial increase in sales in the Game & Network Services and Financial Services segments. It expanded its 360 Reality Audio services and product offerings, adding new video streaming capabilities and content creation tools. It also unveiled the Airpeak aircraft as part of its drone project in artificial intelligence robotics. By bringing together its cutting-edge technologies, the company intends to contribute to the evolution of mobility for safety and in-car entertainment. These developments are likely to aid Sony’s performance, going forward. The Zacks Consensus Estimate for its current-year earnings has been revised 2.1% upward over the past 30 days. The stock has gained 53.2% in the past year. It currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: SONY
Dolby: Headquartered in San Francisco, CA, Dolby creates audio and imaging technologies that enable spectacular experiences. The company is seeing growing momentum in Dolby content through its partnerships. Dolby has also expanded its reach within music and gaming. The consensus estimate for its current-year earnings has been revised 8.6% upward over the past 30 days. The stock has moved up 64.9% in the past year. It carries a Zacks Rank #2 (Buy).
Price and Consensus: DLB
Sonos: Headquartered in Santa Barbara, CA, Sonos is one of the world’s leading sound experience brands. The company is focused on delivering innovative products and services, strengthening its direct-to-consumer efforts. It is well positioned to deliver significant free cash flow and increased shareholder value over the long term. The consensus mark for its current-year earnings has been revised 9% upward over the past 30 days. The stock has returned a whopping 199.2% in the past year. It carries a Zacks Rank #3.
Price and Consensus: SONO
GoPro: Headquartered in San Mateo, CA, GoPro sells cameras, drones and wearable accessories in the United States and globally. The company has evolved from a hardware unit-sales-centric business to a direct-to-consumer subscription-centric business. In April 2021, GoPro subscribers surpassed 1 million. GoPro launched its new Quik App and made it available to smartphone users via an annual subscription. The consensus estimate for its current-year earnings has been revised 1.7% upward over the past 30 days. The stock has soared 142.5% in the past year. It carries a Zacks Rank #3.
Price and Consensus: GPRO
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>