Dolby Laboratories, Inc. (DLB) is a leader in immersive entertainment experiences. It creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles.

Dolby has continuously contributed to audio and video technologies and evolutions with its innovations. The company recently introduced its comprehensive range of cloud video products and solutions for real-time interactive streaming, delivering content with minimal delay to create cross-platform and interactive experiences.

Dolby’s innovative partnerships help it to pioneer creative segments. Recently, teamed with Jin of 21st-century pop icons BTS in the latest chapter of the “Love More in Dolby” global brand campaign. Jin’s new single “I’ll Be There” is now available globally in Dolby Atmos. DLB also brought its revolutionary Dolby Atmos® sound to live theater for the first time ever through William Shakespeare’s King Lear.

Further, the company’s recent strategic acquisition of THEO Technologies and GE Licensing, along with its strategic alliance with VIZIO, are enhancing its capabilities and operations and widening its customer reach. Further, the expanding operations will strengthen the company’s market position and position it for continued growth.

Kevin Yeaman, President and CEO of Dolby Laboratories, commented, “We are pleased with the progress we made in fiscal 2024. As we enter fiscal 2025, we have strong momentum with Dolby Atmos and Dolby Vision, our imaging patent portfolio has gotten stronger with the GE Licensing acquisition, and we are excited about our opportunity with Dolby.io, which is well positioned to provide real-time interactive experiences for sports and entertainment.”

Shares of DLB have surged 6.8% over the past month and 1.6% over the past six months to close the last trading session at $80.25.

Let’s look at factors that could influence DLB’s performance in the upcoming months.

Positive Recent Developments

On September 13, DLB released a new comprehensive range of cloud video products and solutions supporting real-time interactive streaming. The announcement came soon after DLB’s acquisition of THEO Technologies, a leading provider of high-quality video streaming tools.

The company’s new range of cloud video streaming products delivers content to create cross-platform, interactive experiences. It is built on DLB’s vision to bring experiences to the industry and revolutionize the viewing experience for live events.

On June 6, DLB entered into a definitive agreement to acquire GE Licensing, which owns, maintains, and licenses an extensive portfolio of IP primarily targeting the consumer digital media and electronics sectors. The strategic acquisition bodes well with DLB’s operations. It strengthens DLB’s licensing businesses and will create opportunities for future growth.

Robust Financials

During the fourth quarter, which ended September 27, 2024, DLB’s total revenue increased 4.9% year-over-year to $304.81 million, and its operating income was $46.35 million. The company reported gross profit of $270.81 million, up 6.2% from the prior year’s period.

Furthermore, non-GAAP net income attributable to DLB amounted to $78.44 million, up 22.7% year-over-year. The company’s non-GAAP EPS rose 24.6% from the year-ago value to $0.81. Also, as of September 27, 2024, the company’s total assets came in at $3.11 billion compared to $2.98 billion as of September 29, 2023.

Favorable Analyst Estimates

Analysts expect DLB’s revenue for the first quarter (ending December 2024) to increase 9.7% year-over-year to $346.15 million. The consensus EPS estimate of $1.05 for the ongoing quarter reflects a 4.3% year-over-year improvement. Furthermore, DLB has an impressive earnings surprise history, having topped the consensus EPS estimates in each of the trailing four quarters.

For the fiscal year ending September 2025, the company’s revenue and EPS are expected to grow 6.4% and 7.1% year-over-year to $1.36 billion and $4.06, respectively. Additionally, Street expects its revenue and EPS for the fiscal year 2026 to increase 4.5% and 7% year-over-year to $1.42 billion and $4.35, respectively.

High Profitability

DLB’s trailing-12-month gross profit margin of 88.97% is 77.1% higher than the industry average of 50.24%. The stock’s trailing-12-month EBIT margin of 21.28% is significantly higher than the industry average of 5.41%. Also, its trailing-12-month net income margin of 20.56% is 427.7% higher than the industry average of 3.90%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 10.84%, 6.84%, and 8.42% are favorable compared to the industry averages of 4.18%, 3.21%, and 2.02%, respectively.

POWR Ratings Reflect Promise

DLB’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DLB has an A grade for Sentiment, which is in sync with its optimistic analysts’ expectations.

In addition, the stock also has an A grade for Quality, consistent with its higher-than-industry profitability.

DLB is ranked #3 in the 41-stock Technology – Electronics industry.

Beyond what I have stated above, we have also given DLB grades for Value, Growth, Momentum, and Stability. Get access to all the DLB Ratings here.

Bottom Line

DLB is a market leader in the entertainment experiences segment, revolutionizing movies, TV shows, apps, music, sports, and gaming. The company’s latest technological innovations, strategic acquisitions, and collaborations are strengthening its prospects and market position.

Given DLB’s solid financials, accelerating profitability, and promising analysts’ estimates, this stock could be an ideal buy now.

How Does Dolby Laboratories, Inc. (DLB) Stack Up Against Its Peers?

While DLB has an overall POWR Rating of A, investors could also check out these other stocks within the Technology – Electronics industry with A (Strong Buy) or B (Buy) ratings: Brother Industries, Ltd. (BRTHY), Fuji Electric Co., Ltd. (FELTY), and Universal Electronics Inc. (UEIC).

For exploring more A and B-rated technology – Electronics stocks, click here.

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DLB shares were trading at $79.01 per share on Friday afternoon, down $1.24 (-1.55%). Year-to-date, DLB has declined -6.87%, versus a 28.35% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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