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Dolby Laboratories, Inc. Message Board

  • slegermark slegermark Apr 26, 2013 11:16 AM Flag

    Q1 earnings. Revs fall, earnings fall but stock gaps up two points.

    Outlook not so great.
    I don't get it.
    In another sector it would drop 3 points.

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    • First, they beat estimates by a nice margin on both revenue and EPS. Second, if you listened to the call, the mix is shifting more to licensing as their mobile business is growing strongly. Third, if global consumer electronics pick up even a little, this company will benefit strongly given the operating leverage of the business.

      The valuation is dirt cheap for a business that generates high margins and free cash flow. The EV/EBITDA is barely over 6x, which basically assumes no growth for an extended period. The company has a over $7/share in cash and investments, so there is plenty of room for another special dividend or an enlarged buyback.

      This is a defensive business with a lot of upside potential. Based on the current outlook, in my opinion, the stock should be trading at $40.

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