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3 Audio Video Stocks Worth Watching in a Flourishing 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. Dolby Laboratories (DLB - Free Report) . GoPro, Inc (GPRO - Free Report) and LiveOne, Inc (LVO - Free Report) 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. In the near term, muted consumer demand amid a weak global 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 #48, which places it in the top 19% of more than 251 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 lost 18.9% over this period compared with the S&P 500’s increase of 26.4%. The broader sector has appreciated 5.6% 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 0.85X compared with the S&P 500’s 3.99X. It is below the sector’s trailing 12-month P/S of 1.99X.
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
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 second-quarter fiscal 2024 results. Non-GAAP earnings per share (EPS) came in at $1.27 compared with $1.26 reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate of $1.17. Total revenues were $364.5 million, lower than $375.9 million in the year-ago quarter. However, the top line surpassed the Zacks Consensus Estimate by 0.7%. Management reiterated its guidance for fiscal 2024. The company expects revenues to be $1.30 billion. GAAP EPS is projected to be between $2.30 and $2.45. Non-GAAP EPS is suggested in the range of $3.60-$3.75.
Dolby’s performance is gaining from the increasing adoption of Dolby Atmos and Dolby Vision. The company expects revenues from these businesses, along with imaging patents, to grow by high-single digits in fiscal 2024. Management continues to forecast a multi-year CAGR of 15-25% in these businesses over the medium term.
However, soft device sales 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 $3.71 per share, up 12.8% in the past 60 days.
Price and Consensus: DLB
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 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 April 2024, the company announced preliminary results for fiscal fourth quarter and fiscal 2024. The company now expects revenues to be in the range of $118.5 million for the fiscal 2024 and $30.3 million for the fiscal fourth quarter. For the fiscal 2025, the company maintained its revenue guidance of $140-$155 million.
LVO carries a Zacks Rank #2 (Buy). The consensus estimate for its fiscal 2025 bottom line is pegged at a loss of 6 cents per share. Shares of the company have gained 16.1% in the past year.
Price and Consensus: LVO
GoPro: Headquartered in San Mateo, CA, GoPro is one of the leading manufacturers of the world's most handy camera and an enabler of some of today's most immersive and engaging content.
GoPro reported better-than-expected first-quarter 2024 results. Non-GAAP loss of 21 cents per share came in narrower than the Zacks Consensus Estimate of a loss of 24 cents. The company incurred a loss of 18 cents in the year-ago quarter. It generated revenues of $155.5 million, down 11% year over year. The top line beat the consensus mark by 5.6%.
Revenue growth in the Retail business segment, along with increasing subscriber base, cushioned the top-line performance. It recorded 2.5 million subscribers, marking 6% year-over-year growth at the end of the quarter under discussion. Management envisions subscribers at 2024-end to be between 2.5 million and 2.6 million.
Management noted that it added more than 4,200 new retail doors since the second quarter of 2023. It further said that it remains on track to add another 3,000-6,000 new doors by the end of 2025 to boost its go-to-market capabilities for its product roadmap.
However, weakness in the GoPro channel is a concern. Owing to the development process taking longer than anticipated, GPRO expects the launch of the new entry-level camera in the third quarter of 2024 instead of the second quarter. The new 360 camera is scheduled to be launched in the fourth quarter now. The delay in launches will have a negative impact of $65-$85 million on revenues in 2024.
As a result, GPRO now expects units to be 2.85 million, whereas revenues to be slightly above $900 million for 2024. Apart from the delays, muted consumer spending in the absence of promotional activity, declining camera sales at GoPro.com, global macroeconomic concerns and increasing competition remain headwinds.
Currently, GPRO carries a Zacks Rank #3 (Hold). The consensus estimate for its current-year earnings is pegged at a loss of 12 cents per share, unchanged in the past 60 days.
Price and Consensus: GPRO
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3 Audio Video Stocks Worth Watching in a Flourishing Industry
The Zacks Audio Video Production industry participants are concentrating on the premium segment of the branded products market for business growth. Dolby Laboratories (DLB - Free Report) . GoPro, Inc (GPRO - Free Report) and LiveOne, Inc (LVO - Free Report) 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. In the near term, muted consumer demand amid a weak global 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 #48, which places it in the top 19% of more than 251 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 lost 18.9% over this period compared with the S&P 500’s increase of 26.4%. The broader sector has appreciated 5.6% 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 0.85X compared with the S&P 500’s 3.99X. It is below the sector’s trailing 12-month P/S of 1.99X.
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
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 second-quarter fiscal 2024 results. Non-GAAP earnings per share (EPS) came in at $1.27 compared with $1.26 reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate of $1.17. Total revenues were $364.5 million, lower than $375.9 million in the year-ago quarter. However, the top line surpassed the Zacks Consensus Estimate by 0.7%. Management reiterated its guidance for fiscal 2024. The company expects revenues to be $1.30 billion. GAAP EPS is projected to be between $2.30 and $2.45. Non-GAAP EPS is suggested in the range of $3.60-$3.75.
Dolby’s performance is gaining from the increasing adoption of Dolby Atmos and Dolby Vision. The company expects revenues from these businesses, along with imaging patents, to grow by high-single digits in fiscal 2024. Management continues to forecast a multi-year CAGR of 15-25% in these businesses over the medium term.
However, soft device sales 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its current-year bottom line is pegged at earnings of $3.71 per share, up 12.8% in the past 60 days.
Price and Consensus: DLB
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 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 April 2024, the company announced preliminary results for fiscal fourth quarter and fiscal 2024. The company now expects revenues to be in the range of $118.5 million for the fiscal 2024 and $30.3 million for the fiscal fourth quarter. For the fiscal 2025, the company maintained its revenue guidance of $140-$155 million.
LVO carries a Zacks Rank #2 (Buy). The consensus estimate for its fiscal 2025 bottom line is pegged at a loss of 6 cents per share. Shares of the company have gained 16.1% in the past year.
Price and Consensus: LVO
GoPro: Headquartered in San Mateo, CA, GoPro is one of the leading manufacturers of the world's most handy camera and an enabler of some of today's most immersive and engaging content.
GoPro reported better-than-expected first-quarter 2024 results. Non-GAAP loss of 21 cents per share came in narrower than the Zacks Consensus Estimate of a loss of 24 cents. The company incurred a loss of 18 cents in the year-ago quarter. It generated revenues of $155.5 million, down 11% year over year. The top line beat the consensus mark by 5.6%.
Revenue growth in the Retail business segment, along with increasing subscriber base, cushioned the top-line performance. It recorded 2.5 million subscribers, marking 6% year-over-year growth at the end of the quarter under discussion. Management envisions subscribers at 2024-end to be between 2.5 million and 2.6 million.
Management noted that it added more than 4,200 new retail doors since the second quarter of 2023. It further said that it remains on track to add another 3,000-6,000 new doors by the end of 2025 to boost its go-to-market capabilities for its product roadmap.
However, weakness in the GoPro channel is a concern. Owing to the development process taking longer than anticipated, GPRO expects the launch of the new entry-level camera in the third quarter of 2024 instead of the second quarter. The new 360 camera is scheduled to be launched in the fourth quarter now. The delay in launches will have a negative impact of $65-$85 million on revenues in 2024.
As a result, GPRO now expects units to be 2.85 million, whereas revenues to be slightly above $900 million for 2024. Apart from the delays, muted consumer spending in the absence of promotional activity, declining camera sales at GoPro.com, global macroeconomic concerns and increasing competition remain headwinds.
Currently, GPRO carries a Zacks Rank #3 (Hold). The consensus estimate for its current-year earnings is pegged at a loss of 12 cents per share, unchanged in the past 60 days.
Price and Consensus: GPRO