Dolby Laboratories (DLB) AI Stock Analysis

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Dolby Laboratories

(NYSE:DLB)

Rating:72Outperform

Price Target:―

Dolby Laboratories has a solid financial foundation with strong profitability and cash flow management. The technical analysis suggests upward momentum, though caution is needed due to potential overbought conditions. Valuation metrics point to a high P/E ratio, indicating a potential overvaluation. The earnings call reinforced growth in key areas, despite some challenges. Overall, the company is well-positioned for continued success, but investors should monitor valuation and market conditions.

Positive Factors

Automotive Market

DLB will both lead and benefit from automotive OEMs’ growing demand for enhanced in-vehicle audio and entertainment experiences and connected vehicle opportunities with a multibillion-dollar addressable market.

Financial Performance

DLB's strong balance sheet and cash flow continue to fund new product development and opportunistic acquisitions and enhance shareholder returns with periodic dividend increases and share repurchases.

Technology Adoption

DLB's industry-leading, advanced immersive audio and video enhancement technology well-positions it to take advantage of multiple market opportunities, including growth in in-vehicle infotainment, home infotainment, and increasing connected devices.

Negative Factors

Guidance and Forecasting

The company modestly lowered its guidance for fiscal 2025 due to uncertainties in consumer demand and device mix.

Revenue Performance

Second-quarter revenues were slightly below the Street due to the macro environment, and product and services revenue declined about 10.4% year-over-year.

Tariffs and Technology Trends

Tariffs add to uncertainty and difficulty in projecting technology trends, making it challenging to forecast device priorities and technology availability.

Dolby Laboratories (DLB) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$7.17B

Dividend Yield1.69%

Average Volume (3M)361.81K

Price to Earnings (P/E)28.3

Beta (1Y)0.78

Revenue Growth2.71%

EPS Growth39.56%

CountryUS

Employees2,080

SectorIndustrials

Sector Strength93

IndustryInformation Technology Services

Share Statistics

EPS (TTM)1.34

Shares Outstanding61,405,582

10 Day Avg. Volume306,862

30 Day Avg. Volume361,812

Financial Highlights & Ratios

PEG Ratio0.57

Price to Book (P/B)3.08

Price to Sales (P/S)0.00

P/FCF Ratio25.91

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$102.33

Price Target Upside37.04% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

Dolby Laboratories Business Overview & Revenue Model

Company DescriptionDolby Laboratories, Inc. creates audio and imaging technologies that transform entertainment and communications at the cinema, DTV, transmissions and devices, mobile devices, OTT video and music services, and home entertainment devices. The company develops and licenses its audio technologies, such as AAC & HE-AAC, a digital audio codec solution used for a range of media applications.; AVC, a digital video codec with high bandwidth efficiency used in various media devices; Dolby AC-4, an digital audio coding technology that delivers new audio experiences to a range of playback devices; and Dolby Atmos technology for cinema and a range of media devices. Its audio technologies also include Dolby Digital, a digital audio coding technology that provides multichannel sound to applications; Dolby Digital Plus, a digital audio coding technology that offers audio transmission for a range of media applications and devices; Dolby TrueHD, a digital audio coding technology providing encoding for media application; Dolby Vision, an imaging technology for cinema and media devices; Dolby Voice, an audio conferencing technology; and HEVC, a digital video codec with high bandwidth efficiency to support for media devices. In addition, the company designs and manufactures digital cinema servers, cinema processors, amplifiers, loudspeakers, hardware components, video conferencing solutions, and other products for the cinema, television, broadcast, communication, and entertainment industries. Further, it offers various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment. The company serves film studios, content creators, post-production facilities, cinema operators, broadcasters, and video game designers. It sells its products directly to the end users, as well as through dealers and distributors worldwide. Dolby Laboratories, Inc. was founded in 1965 and is headquartered in San Francisco, California.

How the Company Makes MoneyDolby Laboratories makes money primarily through licensing its audio and imaging technologies to a wide range of partners, including consumer electronics manufacturers, content creators, and broadcasters. The company generates significant revenue by licensing its technologies, such as Dolby Atmos and Dolby Vision, to enhance the audio and visual capabilities of products like televisions, smartphones, and gaming consoles. Additionally, Dolby earns revenue from its cinema products and services, including Dolby Cinema, which offers a premium movie-watching experience. The company also benefits from strategic partnerships with major entertainment companies, enabling it to extend its reach and influence across the film and entertainment industries.

Dolby Laboratories Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q2-2025)

% Change Since: -1.57%|

Next Earnings Date:Aug 12, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a mixed outlook. Dolby Laboratories showed strong performance in the automotive, mobile, and TV sectors, with important partnerships and new product launches. However, macroeconomic uncertainties have led to a revised revenue forecast, and product and services revenue showed a year-over-year decline.

Q2-2025 Updates

Positive Updates

Automotive Segment Expansion

Porsche, Cadillac, Volvo, Xiaomi, and Hyundai announced new models incorporating Dolby Atmos and Dolby Vision. Two additional manufacturers, NIO and Zeekr, integrated Dolby Vision, totaling three brands and nine car models.

Positive Revenue and Earnings Results

Q2 revenue was $370 million, aligning with guidance, and a 1% increase year-over-year, with licensing revenue up 2%. Non-GAAP earnings per share were $1.34, a 5% increase year-over-year.

Mobile and TV Ecosystem Growth

Continued expansion of Dolby Vision support in smartphones, with new partners in China and additional models from OPPO, Realme, and Xiaomi. In the TV sector, new models from LG, Sharp, and Hisense now support Dolby Vision.

Cinema and Content Distribution

New Dolby Atmos and Dolby Vision theaters announced in India and South Korea, with expansion in the U.S. through AMC partnership. Major events like the Super Bowl and March Madness were broadcast in Dolby Atmos and Vision.

Strong Financial Position

Dolby repurchased $35 million worth of common stock and declared a dividend increase of 10% to $0.33 per share.

Negative Updates

Revised Revenue Forecast

Revenue guidance for the full year was revised downwards to $1.31 billion - $1.38 billion from the previous $1.33 billion - $1.39 billion due to macroeconomic uncertainties.

Product and Services Revenue Decline

Products and services revenue decreased by 10% year-over-year, slightly below the midpoint of guidance.

Limited Forecast Visibility

The economic environment and consumer spending uncertainties have limited the ability to forecast with precision, affecting revenue projections.

Impact of Macroeconomic Environment

Potential impact of macroeconomic factors on consumer device shipments could reduce revenue by approximately $15 million to $25 million for the remainder of the year.

Company Guidance

In the recent Dolby Laboratories earnings call discussing the second quarter of fiscal year 2025, several key metrics and guidance updates were provided. The company reported Q2 revenue of $370 million, aligning with the midpoint of their guidance, and a 1% year-over-year increase. Licensing revenue was $346 million, up 2% from the previous year, while products and services revenue came in at $24 million, a 10% decline. Non-GAAP earnings per share reached $1.34, marking a 5% annual increase. For fiscal year 2025, Dolby revised its revenue guidance range from $1.33-$1.39 billion to $1.31-$1.38 billion, citing macroeconomic uncertainties. The company anticipates Q3 revenue between $290 million and $320 million, with licensing revenue expected to be $265 million to $295 million. Full-year non-GAAP EPS is projected to be between $3.88 and $4.03. The guidance reflects expected headwinds due to potential changes in consumer spending and device shipments, influenced by economic conditions and trade factors.

Dolby Laboratories Financial Statement Overview

Summary

Dolby Laboratories exhibits a strong financial position with robust profitability, minimal leverage, and efficient cash flow management. The income statement reflects strong margins and stable revenue growth, while the balance sheet showcases a solid capital structure with low financial risk. Cash flow metrics indicate healthy liquidity. There is potential for improvement in revenue growth and ROE.

Income Statement

Positive

Dolby Laboratories shows a strong income statement with a healthy gross profit margin of 88.96% and net profit margin of 20.55% in the TTM (Trailing-Twelve-Months), indicating efficient cost management and profitability. Revenue growth is modest at 1.59% from the previous year, suggesting stable business operations. The EBIT and EBITDA margins are solid at 20.18% and 26.88%, respectively, reflecting strong operational performance. However, the pace of revenue growth could be improved for a higher score.

Balance Sheet

Very Positive

The balance sheet of Dolby Laboratories is robust, with a low debt-to-equity ratio of 0.02, indicating minimal leverage and financial risk. The equity ratio is high at 79.67%, showcasing a strong capital structure. Return on Equity (ROE) is a decent 10.57%, driven by steady profitability. The company maintains substantial equity, offering financial stability and flexibility. Improvement in ROE through higher profit margins could enhance the overall score.

Cash Flow

Positive

Dolby Laboratories demonstrates strong cash flow management, with a free cash flow growth rate of 14.71% and healthy operating cash flow to net income ratio of 1.25 in the TTM. The free cash flow to net income ratio of 1.14 further underscores efficient cash generation relative to net earnings. The company effectively converts its profits into cash, supporting liquidity and operational flexibility. Continued focus on cash flow improvement will be beneficial.

Sep 2024	Sep 2022	Sep 2021	Sep 2020	Sep 2019
Breakdown
Income Statement		Total Revenue
1.27B	1.25B	1.28B	1.16B	1.24B
	Gross Profit
1.13B	1.11B	1.15B	1.02B	1.08B
	EBIT
258.33M	206.60M	344.39M	218.74M	257.08M
	EBITDA
258.33M	329.90M	464.12M	332.60M	404.16M
	Net Income Common Stockholders
360.64M	184.09M	310.23M	231.36M	255.15M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
482.05M	809.34M	1.26B	1.12B	916.36M
	Total Assets
3.11B	2.69B	3.11B	2.92B	2.82B
	Total Debt
46.99M	50.94M	72.12M	81.14M	0.00
	Net Debt
-435.06M	-569.18M	-1.15B	-990.74M	-797.21M
	Total Liabilities
623.03M	438.53M	501.45M	478.92M	508.72M
	Stockholders Equity
2.48B	2.25B	2.60B	2.43B	2.31B
Cash Flow		Free Cash Flow
297.25M	259.12M	393.30M	274.86M	214.14M
	Operating Cash Flow
327.25M	318.58M	447.75M	343.85M	327.67M
	Investing Cash Flow
-286.29M	-295.94M	-44.91M	134.37M	-56.23M
	Financing Cash Flow
-287.81M	-610.56M	-252.51M	-207.78M	-385.28M

Dolby Laboratories Technical Analysis

Technical Analysis Sentiment

Negative

Last Price74.67

Price Trends

50DMA

76.34

Negative

100DMA

78.64

Negative

200DMA

76.06

Negative

Market Momentum

MACD

0.09

Positive

RSI

44.23

Neutral

STOCH

14.66

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DLB, the sentiment is Negative. The current price of 74.67 is below the 20-day moving average (MA) of 75.81, below the 50-day MA of 76.34, and below the 200-day MA of 76.06, indicating a bearish trend. The MACD of 0.09 indicates Positive momentum. The RSI at 44.23 is Neutral, neither overbought nor oversold. The STOCH value of 14.66 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DLB.

Dolby Laboratories Risk Analysis

Dolby Laboratories disclosed 13 risk factors in its most recent earnings report. Dolby Laboratories reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 1 New Risks

Customers Q4, 2024

Dolby Laboratories Peers Comparison

Overall Rating

UnderperformOutperform

Sector (65)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
G	76 Outperform	$7.61B	14.81	22.21%	1.44%	7.31%	-15.86%
CACI	76 Outperform	$10.15B	21.78	13.48%	―	14.16%	22.25%
EPAM	74 Outperform	$9.97B	24.60	11.57%	―	4.72%	-3.06%
JKHY	74 Outperform	$13.25B	30.98	22.49%	1.23%	6.04%	13.36%
DLB	72 Outperform	$7.17B	28.25	10.28%	1.69%	2.71%	39.56%
Sector *	65 Neutral	$4.41B	12.06	5.22%	249.80%	4.09%	-12.16%
DXC	46 Neutral	$2.67B	7.00	12.88%	―	-5.65%	78.20%

* Industrials Sector Average

Performance Comparison

DLB

Dolby Laboratories

75.53

-2.47

-3.17%

CACI

Caci International

467.27

44.16

10.44%

EPAM

Epam Systems

176.65

-0.62

-0.35%

Genpact

44.00

11.26

34.39%

JKHY

Jack Henry & Associates

182.00

20.98

13.03%

DXC

DXC Technology

15.36

0.20

1.32%

Dolby Laboratories Corporate Events

Executive/Board Changes

Dolby Laboratories Unveils 2025 Executive Bonus Plan

Neutral

Nov 15, 2024

Dolby Laboratories has introduced the 2025 Executive Bonus Plan, offering cash bonuses to selected executives based on a percentage of their base salary and the achievement of specific financial goals. The CEO’s bonus is set at 100% of his base salary, while other eligible officers have a target of 65%. The actual payout can vary, influenced by the company’s performance and other discretionary factors, with funding capped at 150% of the target. This plan aligns with the Dolby 2020 Stock Plan, ensuring bonuses do not exceed established limits.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.