Consumer electronics have played a crucial role in enabling remote working and virtual learning amid the COVID-19 pandemic. This trend has become the new normal and is expected to continue in the foreseeable future.
Rising demand for connected devices and high-end devices is booming, boosting the consumer electronics market. Smartphones, tablets, laptops, home assistant devices, advanced home appliances, printers, and more are seeing rising sales globally. According to Credence Research, the global consumer electronics market is likely to surpass $1.8 trillion by 2023.
Apple Inc. (AAPL) is widely considered the pioneer and leader in the consumer electronics industry. The company has become synonymous with its iPhone, iPad, Siri, and MacBooks. Approximately 77.5% of its revenues comes from the consumer electronics, home accessories, and wearables segments. These segments have witnessed steady growth over the past few quarters.
However, AAPL may have reached a saturation point in terms of investors’ attention and may now be in a bubble. Fortunately, investors that are seeking to exploit the industry’s growth potential can look instead at other players with innovative and niche offerings. We believe Sony Corporation (SNE), Universal Electronics Inc. (UEIC), and Turtle Beach Corporation (HEAR) are three such companies.
While SNE is a global electronics giant, UEIC and HEAR also score well on their unique offerings. Over the past six months, AAPL gained only 16%, while UEIC, and HEAR more than doubled in value. Considering their growth initiatives, we think it likely that SNE, UEIC, and HEAR will continue to outperform AAPL through the remainder of the year.
Sony Corporation (SNE)
SNE is involved in the design, manufacture and sale of electronic equipment, instruments to the consumer, professional, and industrial markets globally. The company also produces consumer and professional video cameras, display products, such as projectors and medical equipment, mobile phones, tablets, and accessories.
In a move to expand its display portfolio, SNE has added two new models for Bravia 4K HDR television – the 100-inch FW-100BZ40J and 32-inch FW-32BZ30J. The new models feature immersive picture quality due to a high-quality picture processor, ease of use and a specialized cosmetic design. The new models are specially designed for educational institutions, businesses, retail and hospitality industry.
During the third quarter, ended December 31, 2020, SNE’s total sales grew 10.2% over the year to JPY 2.7 billion. Its EPS for the quarter climbed to JPY 297.35 from JPY 182.89. Its Electronics Products & Solutions’ revenue was stable at JPY 650 million even amid subdued sales during the coronavirus pandemic.
Analysts expect SNE’s revenue for the quarter ending March 31, 2021 to increase 22.9% year-over-year. Its EPS for the quarter is likely to grow 210% year-over-year.
SNE has climbed 60.4% over the past year to close yesterday’s trading session at $115.03. Over the past six months, the stock gained 40.6%.
SNE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
SNE has an A grade for Sentiment, and B for Growth, Momentum and Stability. Out of the 18 stocks in the C-rated Entertainment - Media Producers industry, it is ranked #1.
In addition to the POWR Ratings grades I've just highlighted, you can see SNE’s ratings for Value and Quality, here.
Universal Electronics Inc. (UEIC)
UEIC develops and manufactures pre-programmed and universal control products, audio-video (AV) accessories, intelligent wireless security and smart home products for the consumer electronics, home entertainment, automation, security, and hospitality markets.
UEIC has introduced the UEI Comfort family of connected thermostats designed for simplification of installation, daily use and climate control support in residential, commercial and hospitality applications. The first product in the UEI Comfort family will be available to OEMs in the second half of 2021. Another version that is designed for the hospitality industry will follow later that year.
During the third quarter, ended 30 September 2020, UEIC’s net sales declined 23.5% year-over-year to $153.5 million. Its EPS for the quarter climbed to $0.43 from $0.19 posted in the prior-year period.
A consensus revenue estimate for the quarter ended December 31, 2021 is $153.7 million, which represents a 12% decrease year-over-year. Meanwhile, its EPS is expected to increase 5.6% to $0.95. UEI’s CFO, Bryan Hackworth, stated, “Our strategic investments in R&D as well as our corporate restructuring efforts have resulted in UEI becoming a much more profitable company delivering an adjusted operating margin of 11.1% of sales and cash flow from operations of $39.3 million in the third quarter of 2020.”
Over the past year, UEIC has surged 31.1% to end yesterday’s trading session at $57.33. Over the past six months, the stock has rallied 32.1%.
UEIC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. UEIC also has a Momentum rating of A along with Value, Sentiment, and Quality ratings of B. Note that the Quality rating is focused on the fundamental metrics of its operations. In the A-rated Technology – Electronics industry, the stock is ranked #1 of 43 companies.
Click here to see the additional POWR Ratings for UEIC (Growth and Stability)
Turtle Beach Corporation (HEAR)
HEAR is primarily an audio technology company that develops, commercializes, and markets gaming headsets for various platforms. This includes video game and entertainment consoles, handheld consoles, personal computers, and mobile and tablet devices sold under the Turtle Beach brand.
HEAR’s preliminary results for the fourth quarter, ended December 31, 2020, is expected to be between $130 million - $132 million. Its EPS is expected to be $0.82 - $0.91. The company’s CEO Juergen Stark stated, “We added to our already dominant position in console headsets, with eight of the top ten best-selling models coming from Turtle Beach. In addition, we more than doubled our sales of ROCCAT PC accessories.”
During the third quarter, ended September 30, 2020, HEAR’s revenue surged 141% year-over-year to $112.5 million. Its EPS for the quarter was $1.04 compared to a loss per share of $0.22. Its adjusted EBITDA also increased to $27.6 million from $0.3 million posted in the prior year quarter.
Analysts expect HEAR’s revenue for the quarter ended December 31, 2020 to be $117.3 million, representing a 15.2% decline year-over-year. Its EPS is expected to grow at the rate of 18% per annum over the next five years.
HEAR ended yesterday’s trading session at $33.76, surging 324.7% over the past year. During the past six months, HEAR climbed 106.8%.
HEAR’S strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Value, Quality and Sentiment, and A grade for Momentum. It is ranked #21 in the A-rated Technology – Electronics industry.
In total, we rate HEAR on eight different levels. Beyond what we stated above, we also have given HEAR grades for Growth and Stability. Get all the HEAR ratings here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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SNE shares were trading at $114.08 per share on Wednesday afternoon, down $0.89 (-0.77%). Year-to-date, SNE has gained 12.84%, versus a 4.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.
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