Dolby (DLB) Gains 20.2% YTD: Will the Upward Trend Last?
Dolby Laboratories DLB is witnessing solid momentum, with shares having increased 20.2% year to date compared with 8% and 15.1% growth of the sub-industry and S&P Composite, respectively. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment.
Dolby specializes in audio noise reduction and audio encoding/compression. The company offers state-of-the-art audio, imaging and voice technologies that revolutionize entertainment and communications at theaters, home, work and mobile devices.
DLB also designs and manufactures audio and imaging products, including digital cinema servers and other products for film production, cinema, television, broadcast and other entertainment industries.
Image Source: Zacks Investment Research
Catalysts Behind the Price Surge
The company is benefiting from rising adoption of Dolby Atmos, Dolby Vision and new imaging patents. Driven by continued momentum in these product lines, Dolby reported second-quarter fiscal 2023 total revenues of $298.4 million, up from $289.6 million in the year-ago quarter.
The company expects revenues from these businesses to grow in the range of 15-25% in fiscal 2023, driven by continued momentum in the broadcast and other markets.
It gains from the adoption of Dolby.io, which is a platform that enables developers to build immersive online experiences. The growing demand for high quality with ultra-low latency applications are further tailwinds.
Dolby’s revenues are estimated to climb 3.6% and 4% on a year-over-year basis in fiscal 2023 and 2024, respectively.
The bottom line is anticipated to rise 11.5% and 10.9% on a year-over-year basis in fiscal 2023 and 2024, respectively. The Zacks Consensus Estimate for fiscal 2023 and 2024 earnings per share is pegged at $3.50 and $3.88, up 0.9% and 1.3%, respectively, in the past 60 days.
DLB has delivered an earnings surprise of 11.9%, on average, in the trailing four quarters.
However, lower unit shipments in PC and consumer electronics are weighing on Dolby’s performance. As a result, management expects its audio revenues to decline low-single digits during fiscal 2023. Rising research and development costs to fend off stiff competition and uncertain macroeconomic conditions are added concerns.
Other Stocks to Consider
Some other stocks worth consideration in the broader technology space are Badger Meter BMI, Salesforce CRM and Pegasystems PEGA. Each stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has risen 6.3% in the past 60 days to $2.86 per share. BMI’s earnings beat estimates in the last four quarters, the average surprise being 6.7%. Shares of BMI have surged 60.5% in the past year.
The Zacks Consensus Estimate for Salesforce’s fiscal 2024 earnings is pegged at $7.44 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.3%.
CRM’s earnings surpassed estimates in the last four quarters, the average beat being 15.5%. Shares of CRM have grown 15.7% in the past year.
The Zacks Consensus Estimate for Pegasystems’ 2023 earnings has improved 6.6% in the past 60 days to $1.46 per share. PEGA’s earnings has an average surprise of 166.2% in the trailing four quarters. Shares of PEGA have jumped 23.2% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Dolby Laboratories (DLB) : Free Stock Analysis Report
Salesforce Inc. (CRM) : Free Stock Analysis Report
Badger Meter, Inc. (BMI) : Free Stock Analysis Report
Pegasystems Inc. (PEGA) : Free Stock Analysis Report
