Is Dolby Laboratories (DLB) the Audio Tech Investment You’ve Been Waiting For? | StockNews.com

Dolby Laboratories, Inc. (DLB) stands out as a global leader in immersive entertainment. They focus on improving sound quality, making audio clearer, and enhancing visual experiences with HDR imaging.

Over the years, Dolby has made a significant impact on audio technology. Their products are popular worldwide, and many leading companies choose DLB for its innovations. These advances help devices and equipment work better, opening up new possibilities.

On September 27, 2024, Dolby finished a strong financial year, reporting impressive growth in revenue and net income during the fourth quarter. Throughout the year, they prioritized efficiency and expansion, including acquiring GE Licensing. This move is expected to enhance their margins and earnings in the next fiscal year, as well as strengthen their imaging patents.

Additionally, Dolby’s acquisition of THEO Technologies has expanded its Dolby.io platform, allowing for better real-time streaming experiences. This led to a launch of a range of cloud video products, setting the stage for future growth.

Dolby maintains strong collaborations with major players like Apple and Xiaomi, which helps to solidify its position in the market. Recently, they partnered with two new automotive companies: WEY from China and Smart, a venture between Mercedes and Geely. This brings their number of automotive partners to over 20, up from 10 just one year back, all supporting Dolby Atmos technology.

Looking ahead to fiscal 2025, Dolby’s future seems bright. With strong momentum in both Dolby Atmos and Dolby Vision technologies, they aim to reach a broader audience, thanks to ongoing investments in audio solutions.

With solid financial growth and expansion plans, DLB shows promise for continued progress. Over the last month, DLB shares rose 2.3%, and they’ve jumped 9.4% over the past three months, closing at $80.99 in the last trading session.

Recent Positive Developments

On September 13, 2024, DLB unveiled a new suite of cloud video products that enhance interactive streaming, thanks to THEO Technologies. This acquisition has boosted Dolby’s capabilities to provide real-time, low-latency experiences.

They also introduced THEOads, a new feature for improved ad insertion within THEOplayer, enhancing ad quality and targeting.

In June 2024, Dolby acquired GE Licensing, which has a wide range of intellectual properties in digital media. This move not only strengthened their licensing business but also opens new growth avenues.

Strong Financial Performance

For the fourth quarter ending September 27, 2024, DLB saw a 4.9% increase in total revenue, reaching $304.81 million. Their licensing revenue specifically grew by 6.6% to $282.71 million. They reported a gross profit of $270.81 million, up 6.2% from last year.

Non-GAAP net income for DLB was $78.44 million, reflecting a 22.7% growth year-over-year. Their non-GAAP earnings per share (EPS) rose by 24.6% to $0.81. Total assets grew to $3.11 billion, compared to $2.98 billion the previous year.

With this strong performance in 2024, Dolby projected their first quarter and full fiscal year 2025 revenues to be between $330 million to $360 million, and licensing revenue between $305 million to $335 million. They also expect a non-GAAP EPS range of $0.96 to $1.11 for the first quarter and an overall revenue estimate of $1.33 billion to $1.39 billion for the full year 2025.

Analyst Optimism

Analysts predict DLB’s first-quarter revenue for December 2024 will reach $346.15 million, marking a 9.7% increase from last year. The consensus EPS estimate for this period is $1.05, reflecting a 4.3% improvement. Notably, DLB has met or exceeded EPS estimates consistently over the past four quarters.

For the fiscal year ending in September 2025, projected revenue and EPS growth is around 6.4% and 7.1%, reaching $1.36 billion and $4.06, respectively. Proposals for the fiscal year 2026 show further anticipated growth of 4.5% in revenue and 7% in EPS.

High Profit Margins

DLB boasts a trailing-12-month EBIT margin of 20.78%, far exceeding the industry average of 5.35%. Their net income margin stands at 20.56%, also higher than the 3.80% average. The trailing-12-month gross profit margin is impressive at 88.97%, significantly above the average of 50.55% in the industry.

Additionally, DLB’s robust returns on capital include a ROCE of 10.84%, ROTC of 6.68%, and ROTA of 8.42%, all surpassing industry averages.

Promising POWR Ratings

DLB’s strong fundamentals shine through its POWR Ratings, currently rated A for a Strong Buy. This rating considers various factors, with an emphasis on sentiment and quality, reflecting positive analyst expectations and remarkable profitability compared to peers.

DLB ranks #2 in the Technology – Electronics industry, with additional ratings in Stability, Growth, Momentum, and Value.

Final Thoughts

Dolby continues to lead in audio technology, showcasing innovative solutions and strategic growth strategies. Their dedication to cutting-edge technology drives demand for new devices, boosting the company’s potential for future profitability.

This makes DLB an attractive option for investors, especially with favorable market trends and strong financial health.

How Does Dolby Compare to Its Peers?

With a POWR Rating of A, DLB stands alongside other strong performers in the Technology – Electronics sector, such as Fuji Electric Co., Ltd. (FELTY), Brother Industries, Ltd. (BRTHY), and Universal Electronics Inc. (UEIC).

Consider looking into other A and B-rated technology stocks for further investment opportunities.

About the Author: Rjkumari Saxena

Rajkumari started her career in writing and moved to financial journalism. With a background in Commerce, she enjoys exploring the business and economic factors in the stock market. Her goal is to simplify financial concepts and help investors make informed decisions. More…

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