3 Audio Video Stocks to Consider Amid Industry Headwinds

The 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 Zacks Audio Video Production industry 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.

Nonetheless, industry participants like Sonos, Inc. SONO, GoPro, Inc. GPRO and LiveOne, Inc. LVO are likely to benefit from investments in cutting-edge technology solutions that create better communication experiences. The players also stand to gain as they increase focus on direct-to-customer sales channels. Rapid technological advances like 4K, 8K, and immersive audio formats are boosting demand for new devices, which bodes well for participants like GoPro. Moreover, with streaming platforms becoming a way of life, these are driving the need for better home sound systems. This is likely to benefit participants like Dolby.

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

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.

Technological Advancement to Spur Growth: Over the years, the shift to digital technology has 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. Strong demand across all regions with a more direct-to-consumer, subscription-centric model bodes well for industry participants.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #201, which places it in the bottom 18% of more than 246 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bleak 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.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries results from an downbeat earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions; it appears that analysts are losing confidence in this group’s earnings growth potential. The industry’s earnings estimate for 2025 now stands at a loss of $1.13 against the earnings estimate of $1.31 as of April 30, 2025.

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 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 37.2% over this period compared with the S&P 500’s growth of 12.3%. The broader sector has surged 28.5% 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 1.76X compared with the S&P 500’s 5.67X. It is below the sector’s trailing 12-month P/S of 2.55X.

In the past five years, the industry has traded as high as 1.88X and as low as 0.97X, with a median of 1.35X, as the chart below shows.

Price-to-Sales TTM Ratio (Past Five Years)

3 Audio Video Production Stocks to Keep an Eye on

Sonos: Headquartered in Santa Barbara, CA, Sonos operates as a consumer electronics company that is primarily involved in the manufacturing of speakers with immersive sound experiences.

Sonos’ top-line performance is gaining from robust home theater sales, especially the Arc Ultra soundbar and the ongoing traction of Ace headphones launched in June last year. Continued geographic expansion bodes well for the long term. Amid an evolving global trade environment, Sonos has proactively reduced China exposure by moving U.S.-bound production to Malaysia and Vietnam. The remaining exposure to China is limited to certain accessories and cobranded products, which have a low contribution to total revenue. Strong cost discipline is driving EBITDA performance. 

The company tweaked its annualized run-rate savings for both GAAP and non-GAAP operating expenses. GAAP operating expenses run rate base is now projected to be $640 million to $670 million, down $100 million to $130 million from the normalized fiscal 2024 GAAP operating expenses of $770 million. This represents an additional savings of $40 million to $60 million compared with the guidance provided in the previous quarter. For the fiscal third quarter, Sonos expects revenues of $310-$340 million, up 19-31% sequentially due to seasonality, but down 14-22% year over year, owing to last year's Ace headphone launch timing.

At present, SONO 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 30 cents, unchanged in the past seven days. Shares are down 25.2% in the past year.

Price and Consensus: SONO

Nonetheless, GoPro continues to expect year-over-year lower unit sales and revenue growth in 2025, plagued by macroeconomic woes, stiff rivalry and the postponed release (later in 2025) of its new 360-degree camera. 

At present, GPRO carries a Zacks Rank #2. The Zacks Consensus Estimate for its 2025 bottom line is pegged at 1 cent, unchanged in the past seven days. Shares are down 51% in the past year.

Price and Consensus: GPRO

Price and Consensus: LVO

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Sonos, Inc. (SONO): Free Stock Analysis Report
 
GoPro, Inc. (GPRO): Free Stock Analysis Report
 
LiveOne, Inc. (LVO): Free Stock Analysis Report

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

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