Dolby Weathered 'Stiff Headwinds' in Q1, Says Analyst, Citing Atmos, Vision Growth
Dolby is “reaping the benefits of growing momentum” behind its Atmos, Cinema, Vision and Mobile businesses, wrote Dougherty & Co. analyst Steven Frankel Thursday after the company’s Wednesday earnings call. Concerns Dolby was facing “stiff headwinds” from a slowing smartphone market, China slowdown and tariffs “proved to be for naught,” as Dolby’s $302.4 million fiscal Q1 revenue, and $98.2 million profit, beat guidance. Repeating a “buy” rating, Frankel cited Dolby’s “dominant competitive position, strong cash flow and increased traction with new revenue initiatives.”
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The addition of Panasonic and TP Vision to the Dolby Atmos and Vision camp is “cementing these two technologies as must-haves,” said Frankel. That leaves Samsung as the only major TV maker not supporting Dolby Vision, which Frankel doesn’t see as “sustainable.” Every major streaming platform in the U.S., Europe and Asia is expanding its Vision/Atmos library, said the analyst, with an increasing number of live events broadcast in Atmos. In Dolby's 400 conversations with customers at CES, discussions shifted from why adopt Dolby Atmos and Vision toward “the how and the when," Dolby CEO Kevin Yeaman said on the call.
Other CES introductions Yeaman highlighted included Dell’s first Dolby Vision PC and Lenovo’s expanded support for a combined Dolby Vision and Atmos experience in its PC line. Dolby demoed iPhone support of Dolby Vision along with Samsung and Huawei smartphones with Atmos. In home entertainment, it showed Apple 4K TV and Amazon 4K Fire TV, which both support the combined Vision and Atmos experience, he said.
Dolby expects the first pay-TV set-top boxes with Vision and Atmos to hit the market this year, and the number of Atmos-equipped sound bars is growing across a range of price points, said Yeaman.
Content embedding Atmos and Vision technologies is growing from partners including iTunes, Netflix, Amazon, Rakuten, Tencent and iQiyi, Yeaman said, focusing on Apple’s 400-plus movies and Netflix’s 500 hours of content. He referenced Premier League Soccer and Winter Olympics broadcasts in Atmos and “a number of” Dolby Vision trials. In November, the NBA began broadcasting select NBA games in North America with Dolby Atmos via DirecTV, he noted.
Dolby gave a Q2 revenue guidance of $325 million-$345 million. Shares closed 5 percent higher Thursday at $64.63.