While the worries over inflation and other macroeconomic uncertainties are expected to keep the entertainment industry under pressure, enhanced user experience by integrating emerging technology makes the industry’s long-term prospects bright. Given the backdrop, it could be worth watching Sony Group Corporation (SONY) and LiveOne, Inc. (LVO) for attractive buying opportunities.
According to Statista, total revenue in the entertainment market is expected to grow at a 10.5% CAGR to $48.76 billion by 2027. The growth can be attributed to various factors, including the increasing popularity of streaming services, increased demand for live events and concerts, and technological advancements.
The global AI market in media and entertainment is expected to reach $53.32 billion by 2028, growing at a CAGR of 26.7%. Increasing usage of AI in the industry should drive its growth. AI is expected to revolutionize gaming, advertising, and content creation.
In light of these encouraging trends, let’s look at the fundamentals of the two Entertainment – Media Producers stocks, starting with number 2.
Stock #2: LiveOne, Inc. (LVO)
LVO acquires, distributes, and monetizes live music, Internet radio, podcasting/vodcasting, and music-related streaming and video content. The company also produces, edits, curates, and streams live music events through broadband transmission over the Internet and satellite networks to its users.
LVO’s forward EV/Sales multiple of 0.96 is 48.9% lower than the industry average of 1.88. Its forward Price/Sales multiple of 0.75 is 34.4% lower than the industry average of 1.14.
LVO’s trailing-12-month asset turnover ratio of 1.52x is 215.5% higher than the 0.48x industry average.
In the first quarter of fiscal 2024, which ended June 30, 2023, LVO’s revenue increased 19.6% year-over-year to $27.76 million. Its gross profit came in at $7.46 million, up 5.6% from the year-ago value. In addition, the company’s adjusted EBITDA increased 12.2% from the prior-year quarter to $2.21 million.
LVO’s revenues have increased at a CAGR of 38% over the past three years, while its total assets have increased at a 3.8% CAGR.
Street expects LVO’s revenue to increase 26.2% year-over-year to $125.66 million for the year ending March 2024. Its EPS is expected to come in at $0.02 for the same period. Over the past nine months, the stock has gained 86.1% to close the last trading session at $1.08.
LVO has an overall C grade, translating to Neutral in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LVO has a B grade for Growth and Sentiment. Within the Entertainment – Media Producers industry, it is ranked #6. To see additional SONY’s ratings for Value, Momentum, Stability, and Quality, click here.
Stock #1: Sony Group Corporation (SONY)
Headquartered in Tokyo, Japan, SONY designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide. The company engages in the distribution and production of software, digital networks, gaming consoles, music, animation, television movies, miniseries, and other television programs.
SONY’s forward EV/EBITDA multiple of 9.23 is 2.5% lower than the industry average of 9.47.
SONY’s trailing-12-month net income margin of 7.28% is 66.1% higher than the industry average of 4.38%. Its trailing-12-month levered FCF margin of 6.37% is 25.5% higher than the industry average of 5.08%.
For the first quarter of fiscal 2024, which ended on June 30, 2023, SONY’s revenue increased 32.9% year-over-year to ¥2.96 trillion ($20.34 billion), while its operating income amounted to ¥253.04 billion ($1.74 billion).
During the same period, the company’s attributable net income stood at ¥217.55 billion ($1.49 billion) and ¥175.67 per share, respectively. Also, its adjusted EBITDA came in at ¥406.20 billion ($2.79 billion).
SONY’s revenues have increased at a CAGR of 13.9% over the past three years, while its total assets have increased at an 11.6% CAGR.
The consensus revenue estimate of 82.03 billion for the year ending December 2023 represents a significant increase year-over-year. Its EPS is expected to come in at $5.04 for the same period. It surpassed EPS estimates in all four trailing quarters. SONY’s shares have gained 17.3% over the past year to close the last trading session at $84.43.
SONY’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system.
It has a C grade for Value, Momentum, Stability, Sentiment, and Quality. It is ranked #4 out of 11 stocks in the same industry. To see SONY’s rating for Growth, click here.
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SONY shares were trading at $86.52 per share on Thursday morning, up $2.09 (+2.48%). Year-to-date, SONY has gained 13.70%, versus a 18.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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