Zacks audio-video production businesses are focusing on the high-end segment of the branded product market for profitable growth. These industry players continue to benefit from a comprehensive product portfolio and direct-to-consumer sales strategy, driven by an accretive customer base. The companies have made efforts to expand their global presence in emerging markets and are focused on intensifying their customer relationship management efforts.
Sony Group Corp. (SONY – Free report), Panasonic Corp. (PCRFY – Free report), Dolby Laboratories, Inc. (DLB – Free report), and Sonos, Inc. (SO NO – Free Report) are likely to benefit from investments in cutting-edge technology solutions that transform entertainment and communication experiences for end users.
Zacks’ audio-video production industry includes manufacturers of televisions, speakers, video players and camcorders. It includes companies that provide high-end game consoles, drones and cameras for home and industrial markets around the world. These companies provide cutting-edge audio, imaging and voice technologies that enhance entertainment and communication experiences. Some industry participants design audio and imaging products, including digital cinema servers and products for the film production and entertainment industries. They have digital assets, production operations and program libraries as well as proprietary software solutions. In addition to providing a host of television production services for film exploitation, broadcast and home entertainment, these companies work with film studios, content creators and post-production facilities.
What is shaping the future of the audio-video production industry
Technological advancements to stimulate growth: Over the years, the switch to digital technology has met the demand for high resolution video, reduced radio frequency and electromagnetic interference problems, making AV systems more user-friendly for data networks. Wireless transmission allowed the broadcast of audio and video signals over wireless data networks seamlessly while improving productivity. Industry players have offered services to various media producers. However, the easy online accessibility of recording equipment and the widespread availability of Internet distribution channels pose challenges.
Changing consumer preferences: In the United States, smart connected TVs, cameras, microphones and speakers are the most popular electronic devices among customers. US manufacturers of audio and video systems face competition from relatively low-cost device importers, particularly from China, Vietnam and Mexico. Nonetheless, these companies benefit from investments in cutting edge technology solutions that transform entertainment and communication experiences for end users. In addition, stability among producers and advertisers will allow the entertainment industry to benefit from increasing levels of consumer disposable income.
Growing demand for premium entertainment: The industry has performed well despite drastic changes in the way media is consumed and distributed. Businesses have also rebounded after experiencing sluggish growth due to a slowdown in television and film production, resulting from the pandemic. Long-term growth drivers are in place, with an economic recovery followed by an improvement in the macroeconomic environment. Rising demand for premium entertainment from record companies, television producers and advertisers is expected to fuel profitable growth. The 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 subscription-driven and more consumer-driven model bodes well for industry participants.
Zacks’ Industry Rankings Shows Bright Prospects
Zacks ‘audio-video production industry is part of Zacks’ larger consumer discretionary sector. He currently has a Zacks Industry Rank # 79, which places him in the top 31% of over 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, indicates strong near-term prospects. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of industries ranked by Zacks is the result of positive earnings prospects for the constituent companies. Looking at revisions to overall earnings estimates, it appears that analysts have regained confidence in the earnings growth potential of this group. Over the past year, industry profit estimates for the current and next year have increased by 50.9% and 19.4%, respectively.
Before we outline a few audio-video production stocks that you might want to consider for your portfolio, let’s take a look at recent stock market performance and industry valuation.
Industry Outperforms Sector, S&P 500
Zacks’ audio-video production industry has outperformed both the broader Zacks consumer discretionary sector and the S&P 500 composite over the past year.
The industry returned 46.6% over this period, compared to a 35.1% increase in the S&P 500. The broader sector gained 15.1%.
One-year price performance
Current industry assessment
Price-to-Sales is commonly used to value audio-video production inventories. The industry currently has a 12-month P / S of 1.32X compared to the S&P 500’s 5.04X. It is also lower than the industry’s 12-month P / S of 3.07X.
Over the past five years, the industry has traded down to 1.43X and as low as 0.51X with a median of 0.79X, as shown in the chart below.
TTM price / sale ratio (last five years)
4 audio-video production actions to watch
Sony Group: Based in Tokyo, Japan, Sony manufactures electronic devices for consumer and industrial markets around the world. The Company’s Electronic Products and Solutions segment benefited from increased sales of televisions and digital cameras. The Music segment is experiencing an increase in recorded music and music publishing sales. The Game & Network Services segment is also experiencing increased sales of hardware and peripherals. Sony Pictures Networks India and Zee Entertainment Enterprises Ltd. recently signed a non-binding condition sheet to combine their linear networks, digital assets, production operations and program libraries. The merged entity would be in a better position to lead consumers’ transition from traditional pay-TV to the digital future. Sony Semiconductor Solutions has announced the upcoming launch of the IMX459 loaded single-photon avalanche diode depth sensor for automotive light sensing and ranging applications using the direct time-of-flight method. These developments are likely to improve Sony’s performance in the future. Zacks’ consensus estimate for current year earnings has been revised up 1.4% in the past 30 days. The stock has gained 49.5% in the past year. He currently wears a Zacks Rank # 3 (Hold).
Price and consensus: SONY
Panasonic: Based in Kadoma, Japan, Panasonic sells and services various electronic products around the world. It operates through five segments: household appliances, living solutions, connected solutions, automotive and industrial solutions. It recently completed the acquisition of Blue Yonder, a leading provider of digital order fulfillment platforms. The takeover strengthens Panasonic’s own digital transformation and customer focus. The company introduced a new wide aperture fixed focal length lens, the LUMIX S 24mm F1.8. Panasonic also unveiled the SoundSlayer immersive portable gaming speaker system, SC-GN01. The consensus estimate of its profits for the current year has been revised up 6.7% in the past 30 days. The stock has returned 49.1% in the past year. He wears a Zacks Rank # 2 (Buy).
Price and consensus: PCRFY
Dolby: Based in San Francisco, California, Dolby creates audio and imaging technologies that transform entertainment and communication experiences. It is witnessing a growing momentum in Dolby content through its partnerships. The company has extended its reach into music and games. Vimeo, the world’s leading all-in-one video software solution, recently announced a market launch with Dolby, to enable the hosting, sharing and playback of videos created in Dolby Vision on Apple devices. Dolby and Cinemo, one of the world’s leading providers of automotive infotainment middleware, have announced a collaboration to accelerate the integration of Dolby Atmos into vehicles. Dolby’s growth strategy rests on three pillars: advancing the science of sight and sound, delivering creative solutions, and delivering superior experiences. The consensus estimate of its profits for the current year has been revised upward by 3.4% in the past 60 days. The stock has risen 42.7% in the past year. He wears a rank 3 of Zacks.
Price and consensus: DLB
His bone: Based in Santa Barbara, California, Sonos is the world leader in sound experience. It enjoys strong demand for its products in the growing global audio market. The company is focused on its three strategic initiatives: expanding its brand, increasing its offerings and promoting operational excellence. It recently announced Beam (Gen 2), the latest version of its compact smart soundbar for TV, music and games. The new Beam offers a more immersive sound experience with increased depth and clarity, as well as support for Dolby Atmos. Sonos is well positioned to generate significant free cash flow and increased shareholder value over the long term. The consensus estimate of its profits for the current year has been revised upwards by 30.6% in the last 60 days. The stock has climbed 152.3% in the past year. He sports a rank 1 of Zacks (strong buy).
Price and consensus: SONO