3 Audio Video Stocks to Focus on as Industry Witnesses Tailwinds

The Zacks Audio Video Production industry participants like Sony Group Corporation SONY, Dolby Laboratories, Inc. DLB and Sharp Corporation SHCAY are likely to benefit from investments in cutting-edge technology solutions that drive enhanced communication experiences. Streaming, creator content, gaming and AI-powered tools are reimagining value creation across the industry. Rapid technological advances, such as 4K, 8K and immersive audio formats, are boosting demand for new devices, which bodes well for participants like Dolby. The players also stand to gain as they increase focus on direct-to-customer sales channels

Macroeconomic challenges loom large. Global macroeconomic uncertainty amid escalating trade tensions, tariffs and associated inflationary pressure is likely to keep consumer spending in check. This does not bode well for the participants. A highly promotional environment and stiff competition from importers of comparatively low-priced devices are denting margins. Online accessibility of recording equipment and the availability of distribution channels on the Internet are additional headwinds. 

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.

4 Trends Shaping the Future of the Audio-Video Production Industry

Technological Advancement to Spur Growth: From rapid technological advances like 4K, 8K and immersive audio formats, the demand for high-resolution visual and audio experiences is a major growth driver. The rise of streaming or OTT platforms is fueling this trend, as consumers and businesses seek to recreate a cinematic atmosphere at home. Gaming is another catalyst, as PC and console gamers now seek enhanced visuals and immersive sound design. The rise of the creator economy is also fueling demand for enhanced cameras and editing tools. Industry players like GoPro are benefiting from this trend, as its cameras are popular among creators.  Automotive audio represents another lucrative opportunity as vehicles become more software-driven and experience-focused. 

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. Strong demand across all regions with a more direct-to-consumer, subscription-centric model bodes well for industry participants.

Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic uncertainty, amid escalating trade tensions and tariffs, and associated inflationary pressures, are likely to keep consumer spending, especially discretionary purchases, in check. While companies keep investing in market share gains and supply-chain resilience, a shortage of critical hardware components due to disruption in the supply chain could hurt revenues in the near term. Fluctuations in commodity pricing for different components are additional concerns. Elevated promotional activity to boost sales amid weak spending is also affecting the performance of these 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.

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 #35, which places it in the top 15% of more than 243 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the 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 two to one.

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 Outperforms the Sector and the S&P 500

The Zacks Audio Video Production industry has outperformed the broader Zacks Consumer Discretionary sector and the S&P 500 composite in the past year.

The industry has jumped 25.1% over this period compared with the S&P 500’s growth of 18.2%. The broader sector is up 2.2% in the same time frame.

One-Year Price Performance

 

Industry's Current Valuation

Price-to-earnings is commonly used for valuing audio-video production stocks. The industry has a forward 12-month P/E of 20.86X compared with the S&P 500’s 23.3X. It is above the sector’s forward 12-month P/E of 18.62X.

In the past five years, the industry has traded as high as 23.71X and as low as 11.72X, with a median of 16.63X, as the chart below shows.

Price-to-Earnings Forward Ratio (Past Five Years)

 

3 Audio Video Production Stocks to Keep an Eye on

Sony Group Corporation: 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, network services, game hardware and software, mobile phones and image sensors. Sony is also active in producing, acquiring and distributing recorded music and managing and licensing lyrics and music for songs.

Strategic shift toward an entertainment-focused business has been Sony’s key growth driver over the years. In recent years, it has increasingly relied on expanding its content offerings across games, music, film and TV. The company has also prioritized the growth of its intellectual property across various business areas, made strategic investments in content, music catalogs and emerging sectors such as anime, and advanced the development and use of innovative technologies to support content creation.

Sony’s G&NS segment is on a steady track, driven by the continued growth of PlayStation 5 in both active users and user spending. PlayStation’s monthly active users rose 3% year over year in September to 119 million and total play time for the quarter also grew 1%. For fiscal 2025, the sales forecast has been revised upward by 3% from the previous view, led by favorable forex movements and solid hardware sales. 

The sports business gained momentum with the STATSports buyout. Combining its data with Hawk-Eye and KinaTrax is likely to deliver top-tier sports analytics and drive overall growth. However, business volatility in the second half, along with a slowdown in the imaging market, remains a concern.

At present, SONY 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 fiscal 2025 bottom line is pegged at $1.20, unchanged in the past 30 days. Shares have gained 26.5% in the past year.

Price and Consensus: SONY

Price and Consensus: SHCAY

Price and Consensus: DLB

 

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Sony Corporation (SONY): Free Stock Analysis Report
 
Dolby Laboratories (DLB): Free Stock Analysis Report
 
Sharp Corp. (SHCAY): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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