Dolby (DLB) Stock Gains 21.7% YTD: Will the Trend Continue?
Dolby Laboratories DLB witnessed strong momentum this year, with its shares rallying 21.7% compared with the sub-industry’s rise of 18.3%.
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.
The company 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.
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Catalysts Behind the Price Surge
Let’s delve into the factors working in favor of this Zacks Rank #2 (Buy) stock.
The company is benefiting from the increasing adoption of Dolby Atmos, Dolby Vision and new imaging patents. OPPO has launched its flagship phone with Dolby Vision capture and playback. Also, Dolby Atmos and Dolby Vision playback will be utilized in flagship phones from Vivo.
In June, the company announced that it is extending its partnership with Cinépolis to install Dolby’s IMS3000 servers across 2,000 screens. It expects revenues from these businesses to grow in the range of 15-25% in fiscal 2023, driven by continued momentum in broadcast, mobile and other markets.
The company benefits 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 is further tailwinds.
The company reported solid second-quarter fiscal 2023 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Non-GAAP earnings per share were $1.26 compared with 92 cents reported in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 29.9%.
Total revenues were $375.9 million, up from $334.4 million in the year-ago quarter. The top line surpassed the Zacks Consensus Estimate by 8.3%.
However, lower shipments in PC and consumer electronics are weighing on Dolby’s performance. As a result, the company 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 top-ranked stocks in the broader technology space are InterDigital IDCC, Badger Meter BMI and Woodward WWD. InterDigital sports a Zacks Rank #1 (Strong Buy), while Badger Meter and Woodward carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for InterDigital’s 2023 earnings per share (EPS) has increased 249% in the past 60 days to $8.08. The company’s long-term earnings growth rate is 13.9%.
InterDigital’s earnings beat estimates in all the trailing four quarters, delivering an average surprise of 170.9%. Shares of IDCC have rallied 50.3% in the past year.
The Zacks Consensus Estimate for Badger Meter’s 2023 EPS has increased 1.1% in the past 60 days to $2.72.
Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have surged 84% in the past year.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 EPS has increased 3.8% in the past 60 days to $3.58.
WWD’s long-term earnings growth rate is 13.5%. Shares of WWD have gained 11% in the past year.
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