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3 Audio Video Stocks Worth Watching in a Thriving Industry
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The Zacks Audio Video Production industry participants are concentrating on the premium segment of the branded products market for business growth. Panasonic Holdings Corporation , Dolby Laboratories (DLB - Free Report) and Sonos (SONO - Free Report) and are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. Easing supply chain issues is likely to aid the performance of these companies. However, in the near term, muted consumer demand amid a weak macroeconomic environment globally is a concern for companies within the industry. A highly promotional environment and stiff competition from importers of comparatively low-priced devices put pressure on these players. Online accessibility of recording equipment and the availability of distribution channels on the Internet are a headwind.
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?
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.
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. The companies will likely benefit from investments in cutting-edge technology solutions that create a seamless communications experience.
Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness and inflationary pressure will likely 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 volatile supply chain dynamics 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 Bright Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #104, which places it in the top 42% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average 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 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 gained 3% over this period compared with the S&P 500’s increase of 23.1%. The broader sector has gained 4.7% 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 1.02X compared with the S&P 500’s 4.46X. It is below the sector’s trailing 12-month P/S of 1.94X.
In the past five years, the industry has traded as high as 1.46X and as low as 0.63X 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
Dolby Laboratories: San Francisco, CA-based Dolby Laboratories develops audio and imaging technologies that revolutionize entertainment for user-generated content, TV shows, films, music, and gaming.
Dolby reported better-than-expected first-quarter fiscal 2024 results. Non-GAAP earnings per share (EPS) of $1.01 surpassed the Zacks Consensus Estimate of 89 cents. Total revenues of $315.6 million, topped the Zacks Consensus Estimate by 1.5%. Dolby’s quarterly revenue performance gained from the increasing adoption of Dolby Atmos and Dolby Vision. The company expects revenues from these businesses, along with imaging patents, to grow by a high single digit in fiscal 2024. The company continues to expect a multi-year CAGR of 15% to 25% in these businesses over the medium term. Going ahead, the company plans to expand its user-generated content market by launching new services.
However, lower shipments in broadcast and consumer electronics are weighing down on Dolby’s performance. As a result, the company continues to expect its audio revenues to decline by mid-single-digit digits during fiscal 2024. Rising research and development costs, stiff competition and prevailing uncertain macroeconomic conditions remain concerns.
The Zacks Consensus Estimate for its current-year bottom line is pegged at earnings of $3.73 per share, up 3 cents in the past 60 days.
Price and Consensus: DLB
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 a recovery in automobile production. Increased sales in Avionics and Blue Yonder, along with recovery in the aviation industry, are major tailwinds for the Connect business segment. However, weakening conditions for consumer electronics businesses (especially in China and other Asian markets) and a muted environment for HVAC businesses (especially in Europe) remain concerns.
Currently, PCRFY carries a Zacks Rank #3 (Hold). The consensus estimate for its current-year earnings is pegged at $1.29 per share, up 4% in the past 60 days. The long-term EPS growth rate stands at 17.6%. Shares of PCRFY have surged 4% in the past year.
Price and Consensus: PCRFY
Sonos: Headquartered in Santa Barbara, CA, Sonos operates as a consumer electronics company primarily involved in manufacturing smart speakers with immersive sound experiences.
Sonos expects to generate more than $100 million from new product introductions in fiscal 2024. The company expects the fiscal 2024 gross margin to benefit from lower component costs, a favorable product mix, fewer spot component purchases and lower excess component provisions. The company benefits from the addition of new households to its install base and subsequent purchases by existing customers over time.
In the last reported quarter, SONO’s performance was affected due to softness across all business segments and geographies amid a volatile macroeconomic environment. Sonos reported first-quarter fiscal 2024 non-GAAP earnings per share of 84 cents compared with 79 cents in the prior-year quarter. Quarterly revenues declined 8.9% (down 10.5% on a constant-currency basis) year over year to $612.9 million due to soft consumer demand. However, the top line surpassed the Zacks Consensus Estimate by 4.1%.
Currently, SONO carries a Zacks Rank #3. The Zacks Consensus Estimate for SONO’s fiscal 2024 earnings per share is pegged at 91 cents, up 1 cent in the past seven days. SONO’s long-term earnings growth rate is 7.6%.
Price and Consensus: SONO
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3 Audio Video Stocks Worth Watching in a Thriving Industry
The Zacks Audio Video Production industry participants are concentrating on the premium segment of the branded products market for business growth. Panasonic Holdings Corporation , Dolby Laboratories (DLB - Free Report) and Sonos (SONO - Free Report) and are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. Easing supply chain issues is likely to aid the performance of these companies. However, in the near term, muted consumer demand amid a weak macroeconomic environment globally is a concern for companies within the industry. A highly promotional environment and stiff competition from importers of comparatively low-priced devices put pressure on these players. Online accessibility of recording equipment and the availability of distribution channels on the Internet are a headwind.
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?
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.
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. The companies will likely benefit from investments in cutting-edge technology solutions that create a seamless communications experience.
Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness and inflationary pressure will likely 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 volatile supply chain dynamics 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 Bright Prospects
The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #104, which places it in the top 42% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average 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 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 gained 3% over this period compared with the S&P 500’s increase of 23.1%. The broader sector has gained 4.7% 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 1.02X compared with the S&P 500’s 4.46X. It is below the sector’s trailing 12-month P/S of 1.94X.
In the past five years, the industry has traded as high as 1.46X and as low as 0.63X 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
Dolby Laboratories: San Francisco, CA-based Dolby Laboratories develops audio and imaging technologies that revolutionize entertainment for user-generated content, TV shows, films, music, and gaming.
Dolby reported better-than-expected first-quarter fiscal 2024 results. Non-GAAP earnings per share (EPS) of $1.01 surpassed the Zacks Consensus Estimate of 89 cents. Total revenues of $315.6 million, topped the Zacks Consensus Estimate by 1.5%. Dolby’s quarterly revenue performance gained from the increasing adoption of Dolby Atmos and Dolby Vision. The company expects revenues from these businesses, along with imaging patents, to grow by a high single digit in fiscal 2024. The company continues to expect a multi-year CAGR of 15% to 25% in these businesses over the medium term. Going ahead, the company plans to expand its user-generated content market by launching new services.
However, lower shipments in broadcast and consumer electronics are weighing down on Dolby’s performance. As a result, the company continues to expect its audio revenues to decline by mid-single-digit digits during fiscal 2024. Rising research and development costs, stiff competition and prevailing uncertain macroeconomic conditions remain concerns.
At present, DLB 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 bottom line is pegged at earnings of $3.73 per share, up 3 cents in the past 60 days.
Price and Consensus: DLB
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 a recovery in automobile production. Increased sales in Avionics and Blue Yonder, along with recovery in the aviation industry, are major tailwinds for the Connect business segment. However, weakening conditions for consumer electronics businesses (especially in China and other Asian markets) and a muted environment for HVAC businesses (especially in Europe) remain concerns.
Currently, PCRFY carries a Zacks Rank #3 (Hold). The consensus estimate for its current-year earnings is pegged at $1.29 per share, up 4% in the past 60 days. The long-term EPS growth rate stands at 17.6%. Shares of PCRFY have surged 4% in the past year.
Price and Consensus: PCRFY
Sonos expects to generate more than $100 million from new product introductions in fiscal 2024. The company expects the fiscal 2024 gross margin to benefit from lower component costs, a favorable product mix, fewer spot component purchases and lower excess component provisions. The company benefits from the addition of new households to its install base and subsequent purchases by existing customers over time.
In the last reported quarter, SONO’s performance was affected due to softness across all business segments and geographies amid a volatile macroeconomic environment. Sonos reported first-quarter fiscal 2024 non-GAAP earnings per share of 84 cents compared with 79 cents in the prior-year quarter. Quarterly revenues declined 8.9% (down 10.5% on a constant-currency basis) year over year to $612.9 million due to soft consumer demand. However, the top line surpassed the Zacks Consensus Estimate by 4.1%.
Currently, SONO carries a Zacks Rank #3. The Zacks Consensus Estimate for SONO’s fiscal 2024 earnings per share is pegged at 91 cents, up 1 cent in the past seven days. SONO’s long-term earnings growth rate is 7.6%.
Price and Consensus: SONO