Despite prevailing macroeconomic concerns, the entertainment sector continues to expand, driven by the evolution of consumer preferences and rapid technological advancements. Given the backdrop, it might be wise to closely monitor Sony Group Corporation (SONY), News Corporation (NWSA), and LiveOne, Inc. (LVO).

The entertainment industry underwent a notable transformation during the pandemic, marked by a shift from offline to online platforms that led to an unparalleled surge in the adoption of streaming services. As traditional entertainment avenues encountered setbacks, online entertainment, and media companies witnessed a considerable upsurge in their subscriber counts.

In 2022, the worldwide online entertainment market achieved a size of $367.10 billion. Looking ahead, the market is expected to hit $1.20 trillion by 2028, growing at a robust CAGR of 20.6% during the period spanning 2023 to 2028.

The entertainment industry's outlook is further fortified by various factors, including the expanding dimensions of touchscreen displays, increasing internet penetration, and the advent of high-speed 5G internet connectivity.

Notably, by the close of this year, global 5G connections are projected to reach an impressive count of 1.90 billion, showcasing a remarkable trajectory. This projection outlines an exceptional growth path, with 6.80 billion global 5G connections anticipated by the conclusion of 2027.

Moreover, despite existing challenges in the global entertainment and media sector stemming from subdued consumer spending, leading to a slowdown in revenue growth, the industry is strategically positioned for future success.

The sector focuses on embracing emerging technologies, particularly with a strong emphasis on leveraging generative AI to amplify creative processes and elevate productivity. Given the booming demand, Generative AI in the media and entertainment market is expected to reach $12.08 billion by 2032, growing at an impressive CAGR of 26.7%.

Overall, the entertainment industry's evolution, resilience, and pursuit of cutting-edge technologies create robust opportunities within the industry. Thus, keeping a watch over SONY, NWSA, and LVO could be beneficial.

Let us dig deeper into the fundamentals of the aforementioned entertainment stocks:

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.

On August 24, SONY’s Sony Semiconductor Solutions Corporation (SSS) announced the upcoming release of the ECX344A, a large-size, high-definition 1.3-type OLED Microdisplay with 4K resolution. This will contribute to more realistic recreations of spaces. The new product could bolster the topline of the company.

On June 5, SONY entered into a multi-year global partnership agreement with Fnatic Ltd, an organization operating a professional esports team headquartered in London, United Kingdom. This partnership includes joint efforts in product development for SONY's gaming gear brand, INZONE™.

By leveraging this collaboration, SONY aims to craft innovative gaming gear to elevate players to triumph in fiercely competitive games. Furthermore, this strategic move seeks to provide distinctive and immersive experiences for a wide array of players, including avid Fnatic fans.

SONY’s trailing-12-month net income margin of 7.28% is 73.9% higher than the 4.19% industry average. Its trailing-12-month levered FCF margin of 6.37% is 31% higher than the industry average of 4.86%. In addition, the stock’s trailing-12-month cash per share of $4.02 is 74.9% higher than the industry average of $2.30.

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).

Street expects SONY’s revenue for the second quarter (ending September 2023) to increase 5.4% year-over-year to $19.58 billion, while its EPS for the current quarter is expected to be $1.13 and is projected to improve by 5.9% per annum over the next five years. Moreover, the company topped its revenue estimates in three of the trailing four quarters, which is promising.

SONY’s revenue and net income have grown at CAGRs of 13.9% and 12.7% over the past three years, respectively. Over the same period, its EPS and total assets rose at CAGRs of 13.2% and 11.6%, respectively.

The stock has gained 6.3% year-to-date to close the last trading session at $81.05.

SONY has an overall rating of C, translating to Neutral in our proprietary POWR Ratings system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.

It has a C grade for Value, Momentum, Stability, Sentiment, and Quality. It is ranked #3 out of 11 stocks in the Entertainment - Media Producers industry. To see SONY’s rating for Growth, click here.

News Corporation (NWSA)

NWSA is a media and information services company that creates and distributes authoritative and engaging content and other products and services for consumers and businesses worldwide. It operates in six segments: Digital Real Estate Services; Subscription Video Services; Dow Jones; Book Publishing; News Media; and Other.

On August 10, NWSA declared a semi-annual dividend of $0.10 per share on its Class A and Class B common stock, payable to its shareholders on October 11, 2023.  The company’s annual dividend of $0.20 translates to a 0.97% yield on the prevailing prices, while its four-year average yield is 1.19%.

NWSA’s trailing-12-month asset turnover ratio of 0.58x is 19.4% higher than the industry average of 0.48x. Its trailing-12-month CAPEX/Sales of 5.05% is 25.4% higher than the industry average of 4.02%. Furthermore, the stock’s trailing-12-month cash per share of $3.20 is 116.5% higher than the industry average of $1.48.

In the fourth quarter of fiscal 2023, which ended June 30, 2023, NWSA’s total revenues came in at $2.43 billion. Its total segment EBITDA increased 8% year-over-year to $341 million. Moreover, during the same quarter, the company’s adjusted net income attributable to shareholders amounted to $78 million, while its adjusted EPS stood at $0.14.

The consensus revenue estimate of $2.61 billion for the second quarter of fiscal 2024 (ending December 2023) represents a 3.5% increase year-over-year. The consensus EPS estimate of $0.23 for the same quarter reflects a 61.9% improvement year-over-year.

Additionally, NWSA’s revenue and EBIT have grown at CAGRs of 3.1% and 24% over the past three years, respectively. Likewise, over the same period, its total assets and levered FCF have improved at CAGRs of 5.9% and 9.6%, respectively.

Over the past six months, NWSA’s shares have gained 17.9% to close the last trading session at $20.64.

NWSA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system.

It also has a B grade for Growth and Sentiment. Within the same industry, it is ranked first. Click here to see the other ratings of NWSA’s for Value, Momentum, Stability, and Quality.

LiveOne, Inc. (LVO)

LVO is a digital media company that engages in acquiring, distributing, and monetizing 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.

On July 14, LVO declared an increase to its stock repurchase program to approximately $7.5 million worth of its shares of common stock, including the shares that have already been repurchased. This might increase the shareholder value of the company.

On July 5, LVO revealed that it broke numerous membership records and attributed this remarkable growth to Tesla, which stands as LVO's largest client. Commenting on this, LVO’s CEO and Chairman, Robert Ellin, said, "We're experiencing a phenomenal surge in membership, boasting an unprecedented leap in both free ad-supported and paid subscribers in LiveOne's history.”

The stock’s trailing-12-month asset turnover ratio of 1.52x is 214.2% 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. While its gross profit came in at $7.46 million, up 5.6% from the year-ago value. In addition, the company’s adjusted EBITDA improved 12.2% from the prior-year quarter to $2.21 million.

Analysts expect LVO’s revenue for the second quarter (ending September 2023) to increase 24.3% year-over-year to $29.26 million, while its EPS for the current quarter is projected to improve 91.7% year-over-year.

Moreover, its revenue grew at 37.9% and 47.8% CAGRs over the past three and five years, respectively. Likewise, its total assets improved at a CAGR of 3.8% over the past three years.

LVO’s shares have gained 168.8% year-to-date and 136.9% over the past nine months to close the last trading session at $1.73.

LVO has an overall C grade, which translates to Neutral in our POWR Ratings system. It’s no surprise that LVO has a B grade for Growth and Sentiment. Out of 11 stocks in the same industry, it is ranked #4.

In addition to the POWR Ratings we’ve stated above, we also have LVO’s ratings for Value, Momentum, Stability, and Quality. Get all LVO ratings here.

What To Do Next?

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SONY shares were trading at $80.82 per share on Friday morning, down $0.23 (-0.28%). Year-to-date, SONY has gained 6.21%, versus a 15.48% rise in the benchmark S&P 500 index during the same period.

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