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3 Audio Video Stocks to Keep an Eye On in a Troubled Industry
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Declining consumer demand and supply chain disruptions continue to affect companies in the Zacks Audio Video Production industry. Also, fierce competition from importers of comparatively low-priced devices puts pressure on these industry players. Online accessibility of recording equipment and the availability of distribution channels on the Internet are headwinds. The companies are concentrating on the premium segment of the branded products market for business growth. Sony Corporation (SONY - Free Report) , GoPro (GPRO - Free Report) and LiveOne (LVO - 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 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 the film production 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, 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 Audio Video Production Industry
Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are customers’ most popular electronic devices. But the U.S. manufacturers of audio and video systems persistently 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, often leading to intense price wars and margin contraction. The companies will likely 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 many challenges as the ecosystem transforms in the digital age. The fast-evolving industry has called for innovation, which necessitates the participants to develop ground-breaking technology to stay ahead of the curve. Keeping up with changing consumer preferences, licensee demand and shifting standards make the industry vulnerable to operating risks. While the companies are coming up with attractive offerings to broaden their customer base, they face risks associated with new product development.
Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness owing to the Ukraine war and inflationary pressure are likely to affect consumer demand, especially discretionary purchases. 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 revenues in the near term. Unit volume shipments across end markets and devices are expected to decline. Fluctuations in commodity pricing for different components are additional concerns.
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 #222, which places it at the bottom 11% 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. 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 results from a negative earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are losing confidence in this group’s earnings growth potential. The industry’s loss estimates for 2023 now stand at $4.67 against a loss estimate of $4.26 as of Nov 30, 2022.
Before we present a few audio-video production stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.
Industry Lags S&P 500 and the Sector
The Zacks Audio Video Production industry lagged both the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.
The industry has plunged 37.1% over this period against the S&P 500’s decline of 19.8%. The broader sector has declined 31.5%.
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 0.92X compared with the S&P 500’s 3.36X. It is also below the sector’s trailing 12-month P/S of 1.79X.
In the past five years, the industry has traded as high as 1.43X and as low as 0.63X with a median of 0.91X, as the chart below shows.
Price-to-Sales TTM Ratio (Past Five Years)
3 Audio Video Production Stocks to Keep an Eye on
Sony: Headquartered in Tokyo, Japan, Sony designs, manufactures and sells several consumer and industrial electronic equipment. The company’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers, computer peripherals and telecommunication equipment. Sony is active in producing, acquiring and distributing motion pictures and television programming and operating television and digital networks. The company has a global presence in the music and image-based software markets.
Sony’s performance is gaining from continued strength in the Music and Pictures segments. The company remains focused on the premium segment of the branded products market to maximize growth. Improving sales at the company Games & Network segment is another tailwind. For fiscal 2022, the company expects overall sales to increase 17% due to higher Music, Pictures and G&NS segment sales. Strategic acquisitions and joint ventures bode well. The company expects to sell more than 18-million-unit sales for its PlayStation 5 in the current year.
The Zacks Consensus Estimate for its current-year earnings is pegged at $5.27 per share. The long-term growth rate stands at 5.8%.
Price and Consensus: SONY
GoPro: Headquartered in San Mateo, CA, GoPro is one of the world’s leading manufacturers of handy cameras. GoPro’s performance is benefiting from an increasing subscriber base and expanding direct-to-consumer business.
The company’s subscriber base is gaining from the increased conversion of retail customers into GoPro subscribers through the GoPro app. In the third quarter, the company’s subscriber base rose 55% year over year to 2.1 million. The company plans to invest heavily in synced mobile, cloud and desktop software in 2023 to boost its subscriber engagement and float a higher-priced subscription tier. Frequent new product launches are expected to act as tailwinds.
At present, GPRO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at 43 cents per share.
Price and Consensus: GPRO
LivOne: Headquartered in Beverly Hills, CA, LiveOne provides a platform for livestream 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 company’s performance is driven by the robust LiveOne audio business, including Slacker Radio and PodcastOne. The audio business is witnessing growth in paid members through partnerships, advertising and sponsorships. Synergies from acquisitions and cost-containment efforts bode well. In the last reported quarter, LiveOne posted revenue of $23.5 million up 7.3% on a year-over-year basis, driven by increased membership revenue from continued paid membership growth. The audio division delivered 12.8% increases in revenues to $21.1 million.
At present, LVO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at a loss of 6 cents per share.
Price and Consensus: LVO
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3 Audio Video Stocks to Keep an Eye On in a Troubled Industry
Declining consumer demand and supply chain disruptions continue to affect companies in the Zacks Audio Video Production industry. Also, fierce competition from importers of comparatively low-priced devices puts pressure on these industry players. Online accessibility of recording equipment and the availability of distribution channels on the Internet are headwinds. The companies are concentrating on the premium segment of the branded products market for business growth. Sony Corporation (SONY - Free Report) , GoPro (GPRO - Free Report) and LiveOne (LVO - 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 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 the film production 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, 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 Audio Video Production Industry
Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are customers’ most popular electronic devices. But the U.S. manufacturers of audio and video systems persistently 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, often leading to intense price wars and margin contraction. The companies will likely 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 many challenges as the ecosystem transforms in the digital age. The fast-evolving industry has called for innovation, which necessitates the participants to develop ground-breaking technology to stay ahead of the curve. Keeping up with changing consumer preferences, licensee demand and shifting standards make the industry vulnerable to operating risks. While the companies are coming up with attractive offerings to broaden their customer base, they face risks associated with new product development.
Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness owing to the Ukraine war and inflationary pressure are likely to affect consumer demand, especially discretionary purchases. 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 revenues in the near term. Unit volume shipments across end markets and devices are expected to decline. Fluctuations in commodity pricing for different components are additional concerns.
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 #222, which places it at the bottom 11% 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. 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 results from a negative earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are losing confidence in this group’s earnings growth potential. The industry’s loss estimates for 2023 now stand at $4.67 against a loss estimate of $4.26 as of Nov 30, 2022.
Before we present a few audio-video production stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.
Industry Lags S&P 500 and the Sector
The Zacks Audio Video Production industry lagged both the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.
The industry has plunged 37.1% over this period against the S&P 500’s decline of 19.8%. The broader sector has declined 31.5%.
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 0.92X compared with the S&P 500’s 3.36X. It is also below the sector’s trailing 12-month P/S of 1.79X.
In the past five years, the industry has traded as high as 1.43X and as low as 0.63X with a median of 0.91X, as the chart below shows.
Price-to-Sales TTM Ratio (Past Five Years)
3 Audio Video Production Stocks to Keep an Eye on
Sony: Headquartered in Tokyo, Japan, Sony designs, manufactures and sells several consumer and industrial electronic equipment. The company’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers, computer peripherals and telecommunication equipment. Sony is active in producing, acquiring and distributing motion pictures and television programming and operating television and digital networks. The company has a global presence in the music and image-based software markets.
Sony’s performance is gaining from continued strength in the Music and Pictures segments. The company remains focused on the premium segment of the branded products market to maximize growth. Improving sales at the company Games & Network segment is another tailwind. For fiscal 2022, the company expects overall sales to increase 17% due to higher Music, Pictures and G&NS segment sales. Strategic acquisitions and joint ventures bode well. The company expects to sell more than 18-million-unit sales for its PlayStation 5 in the current year.
At present, Sony carries a Zacks Rank #3 (Hold). 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 $5.27 per share. The long-term growth rate stands at 5.8%.
Price and Consensus: SONY
GoPro: Headquartered in San Mateo, CA, GoPro is one of the world’s leading manufacturers of handy cameras. GoPro’s performance is benefiting from an increasing subscriber base and expanding direct-to-consumer business.
The company’s subscriber base is gaining from the increased conversion of retail customers into GoPro subscribers through the GoPro app. In the third quarter, the company’s subscriber base rose 55% year over year to 2.1 million. The company plans to invest heavily in synced mobile, cloud and desktop software in 2023 to boost its subscriber engagement and float a higher-priced subscription tier. Frequent new product launches are expected to act as tailwinds.
At present, GPRO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at 43 cents per share.
Price and Consensus: GPRO
The company’s performance is driven by the robust LiveOne audio business, including Slacker Radio and PodcastOne. The audio business is witnessing growth in paid members through partnerships, advertising and sponsorships. Synergies from acquisitions and cost-containment efforts bode well. In the last reported quarter, LiveOne posted revenue of $23.5 million up 7.3% on a year-over-year basis, driven by increased membership revenue from continued paid membership growth. The audio division delivered 12.8% increases in revenues to $21.1 million.
At present, LVO carries a Zacks Rank #3. The consensus estimate for its current-year earnings is pegged at a loss of 6 cents per share.
Price and Consensus: LVO