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Why You Keep Hearing about Audio Stocks (SONO, HRAL, SONY, DBL)

One of the oddities now catching economists off-guard in the wake of the pandemic is the jump in household net worth and savings.

Household net worth increased by $5 trillion, or 3.8%, to $136.9 trillion in the first quarter, a Federal Reserve reports out Thursday of last week showed. The gain included a $3.2 trillion gain in the value of equities and a more than $968 billion improvement in real estate held by households.

Net worth equals buying power, which suggests we could be setting up for a boom in discretionary spending, providing a tailwind to consumer electronics brands. While that seems like too diverse an idea to express as an investment thesis, it helps to drill down to a space with a small number of potential opportunities.

In this case, we take a look at the audio electronics space, which includes Sonos Inc (NASDAQ: SONO), Hear AtLast Holdings, Inc. (OTC US: HRAL), Sony Group Corp (NYSE: SONY), and Dolby Laboratories, Inc. (NYSE: DLB).

 

Sonos Inc (NASDAQ: SONO) designs, develops, manufactures, and sells multi-room audio products primarily for use in private residences in the United States and internationally. It offers wireless speakers, home theater speakers, and components.

The company offers its products through third-party retail stores and e-commerce retailers, as well as through its sonos.com Website.

Sonos Inc (NASDAQ: SONO) recently reported record second-quarter fiscal 2021 results, including news that GAAP net income (loss) increased to $17.2 million from ($52.3) million last year; non-GAAP net income (loss) excluding stock-based compensation, restructuring, and legal and transaction-related fees increased to $44.6 million from ($37.2) million last year, and GAAP diluted earnings per share (EPS) increased to $0.12 from ($0.48) last year; non-GAAP diluted earnings per share (EPS) excluding stock-based compensation, restructuring, and legal and transaction-related fees increased to $0.31 from ($0.34) last year.

Sonos CEO Patrick Spence commented, “We are thrilled to report another record quarter at Sonos, as demand for our products continues to exceed even our heightened expectations. The power of our model is that customers can start with one product and expand to more over time, and our customers continue to prove they do just that. Based on our outstanding second-quarter performance, the continued strong demand for our products, and the power and profitability of our unique business model, we are raising our outlook for fiscal 2021 again.”

Over the past five days, shares of the stock have dropped by roughly -4% on above-average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. SONO shares have been relatively flat over the past month of action, with very little net movement during that period.

Sonos Inc (NASDAQ: SONO) generated sales of $332.9M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -48.4% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($639.1M against $371.1M).

 

Hear AtLast Holdings Inc (OTCMKTS: HRAL) recently acquired 100% of fast-growing Canadian start-up Crystal Clear Audio, positioning the company as a developer of leading-edge audio technology for use in listening devices for music and other applications.

HRAL most recently announced its long-anticipated integration of that 2019 acquisition of Crystal Clear Audio, Inc. According to its most recent release, Crystal Clear Audio was acquired in late 2019 by HearAtLast Holdings as a wholly-owned subsidiary in an all-stock transaction and the management worked diligently through this difficult year to bring the first products to market.

Hear AtLast Holdings, Inc. (OTCMKTS: HRAL) has also teamed up with some prominent entertainers and sports stars and collaborated on limited-edition releases, including major brand ambassadors now on board such as Dwayne De Rosario, Claudio “THE MATRIX” Marrero, and Platinum Blonde.

The company has also made strong progress during the pandemic by bringing in new manufacturing relationships and developing new features to be monetized as the operational environment normalizes this year.

HRAL shares have been basing in the sub-penny territory, holding onto key support in the $0.007 area.

Hear AtLast Holdings, Inc. (OTCMKTS: HRAL) is looking forward to far more significant operations in the second half of 2021 than we have seen from the stock during the recent past because it has now fully on-boarded its primary operational asset acquired in 2019.

 

Sony Group Corp (NYSE: SONY) designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets worldwide.

The company distributes software titles and add-on content through digital networks; network services related to the game, video, and music content; and home and portable game consoles, packaged software, and peripheral devices. It also develops, produces, markets, and distributes recorded music; publishes music; and produces and distributes animation titles, game applications based on animation titles, and various services for music and visual products.

Sony Group Corp (NYSE: SONY) most recently announced plans to pump more money into its businesses in the next three years in order to drive growth. The Japanese multinational operates a diverse business portfolio, including manufacturing of electronics for professionals and consumers, film production, and videogames publishing.

The company plans to spend 2 trillion yen ($18 billion) on strategic investments in the three years from Fiscal 2021 through Fiscal 2023. The investments will span across content, technology, and share repurchases.

Even in light of this news, SONY hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Shares of the stock have powered higher over the past month, rallying roughly 6% in that time on strong overall action.

Sony Group Corp (NYSE: SONY) managed to rope in revenues totaling $2220.4B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top-line growth of 27%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($4689.4B against $7815.4B, respectively).

 

Dolby Laboratories Inc (NYSE: DLB) creates audio and imaging technologies that transform entertainment and communications at the cinema, at home, at work, and on mobile devices.

The company develops and licenses its audio technologies, such as AAC & HE-AAC, a digital audio codec solution used for a range of media applications.; AVC, a digital video codec with high bandwidth efficiency used in media devices; Dolby AC-4, an audio coding technology that delivers new audio experiences to a range of playback devices; and Dolby Atmos technology for cinema and a range of media devices.

Dolby Laboratories Inc (NYSE: DLB) recently announced that after more than a 30-year career of financial leadership, Lewis Chew, Executive Vice President, and Chief Financial Officer has decided to retire later this year and focus more time on his family. The company is initiating a global search to identify its next Chief Financial Officer. During this period, Lewis will continue in his role to support the transition.

“Lewis is a distinguished financial leader who has made significant contributions to Dolby over the past nine years,” said Kevin Yeaman, Dolby Laboratories, President and CEO. “While Lewis won’t be retiring until later this year, I want to thank him now for the impact he has made on Dolby and the strong team he has built and wish him the best in his retirement.”

And the stock has been acting well over recent days, up to something like 4% in that time.

Dolby Laboratories Inc (NYSE: DLB) pulled in sales of $319.6M in its last reported quarterly financials, representing top-line growth of -9.2%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($1.2B against $309M).

 

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