4 Consumer Electronics Stocks to Buy for the Second Half of 2021
Consumers’ demand for advanced technology to improve their daily lives is fueling the growth of the consumer electronics industry. While a global semi...
Consumers’ demand for advanced technology to improve their daily lives is fueling the growth of the consumer electronics industry. While a global semiconductor shortage is to some extent hampering the industry’s growth, the rising adoption of 5G and growing societal taste for smart devices, should help maintain the industry's momentum. Consequently, we think the shares of leading consumer electronics companies Apple (AAPL), Sony (SONY), LG Display (LPL), and Sonos (SONO) could be solid bets now.
The consumer electronics industry has evolved dramatically in recent years, underpinned by an accelerated pace of digitization, a pandemic-induced remote working culture and virtual learning trends, as well as an increasing demand for smart gadgets and advanced technologies. In fact, a heightened desire for convenience through smart gadgets and appliances fueled the industry’s growth as individuals spent more time locked in at home over the past year.
While a global semiconductor shortage is currently retarding the industry’s growth, the consumer electronics market is nonetheless projected to hit $989.37 billion in 2027, growing at a 5.3% CAGR from its 2020 level. With the increasing the penetration of Internet of Things (IoT) and continued roll out of 5G networks, the demand for high-end smartphones, tablets, laptops is expected to continue climbing.
Because people are expected to continue with digital lifestyles even when the pandemic is defeated and to equip their homes with convenient-to-use devices and smart appliances, the consumer electronics industry is expected to keep growing. As such, we think consumer electronics giants Apple Inc. (AAPL), Sony Corporation (SONY), LG Display Co. Ltd (LPL), and Sonos, Inc. (SONO) are well positioned to deliver significant returns in the second half of the year.
Apple Inc. (AAPL)
APPL, is one of the largest manufacturers and suppliers of consumer electronics. Its market dominance in the tech world is unparalleled. The company’s innovative edge and brand value have allowed it to enjoy strong growth for years.
Last month, AAPL unveiled new privacy features in iOS 15, iPadOS 15, macOS Monterey, and watchOS 8 that allow users to control better and manage access to their data. These features are the newest contributions to Apple's long history of privacy leadership and might help the company maintain its leadership position by further enhancing its brand value.
Also last month, AAPL unveiled new tools and technologies to assist developers to create more engaging app experiences and make the development of high-quality apps easier. These new features could help the company boost its revenue growth and develop a stronger brand loyalty among consumers.
AAPL’s net sales increased 53.6% year-over-year to $89.58 billion in the second quarter, ended March 27, 2021. Its operating income grew 113.9% from its year-ago value to $27.50 billion, while its net income improved 110.1% year-over-year to $23.63 billion over this period. The company’s EPS has increased 118.8% from its year-ago value to $1.40.
A $5.2 consensus EPS estimate for the current year represents a 58.5% improvement year-over-year. AAPL also has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Analysts expect AAPL's revenue to increase 29% year-over-year to $354.11 billion in its fiscal year 2021. The stock has gained 50.5% over the past year and 18.3% over the past nine months.
AAPL’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree. AAPL has a B Quality rating. The stock is ranked #26 of 45 stocks within the B-rated Technology-Hardware industry. To see more of AAPL’s component grades, click here.
Sony Group Corporation (SONY)
Leading technology conglomerate SONY develops, manufactures, and sells various electronic equipment for the consumer, professional, and industrial sectors. The Tokyo-based company also licenses song lyrics and music, as well as creating and distributing animated films. It is also known for producing films, television content, and digital networks.
In May, Sony Music Entertainment (SME), a wholly owned subsidiary of SONY, announced that it has acquired 100 percent of the shares and related assets of certain Kobalt Music Group Limited subsidiaries relating to AWAL, Kobalt's music distribution business. This acquisition should help the company strengthen its business operations, diversify its portfolio and boost revenue growth.
In the fiscal year ending March 31, 2021, SONY’s net sales have increased 9% year-over-year to ¥9 billion ($81.26 billion). Its operating income grew 15% year-over-year to ¥971.87 billion ($8.78 billion). The company's net income increased 101.3% from its year-ago value to ¥1.17 billion ($10.58 billion) over this period.
The company's EPS is expected to grow 16.1% next year to $6.42. Analysts expect SONY's revenue to increase 6.6% year-over-year to $90.73 billion in its fiscal year 2023. Also, the stock has surged 40.6% over the year and 26.7% over the past nine months.
It is no surprise that SONY has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Sentiment and Stability. In the Entertainment-Media Producers industry, it is ranked #5 of 18 stocks.
In total, we rate SONY on eight different levels. Beyond what we’ve stated above, we have also given SONY grades for Growth, Momentum, Quality, and Value. Get all the SONY ratings here.
LG Display Co. Ltd. (LPL)
Headquartered in Seoul, South Korea, LPL's primary operations involve designing, manufacturing, and selling display panels based on thin-film transistor liquid crystal display (TFT-LCD) and organic light-emitting diode (OLED) technology. Televisions, notebook computers, desktop monitors, tablet computers, mobile gadgets, and automotive displays all employ its TFT-LCD and OLED technologies. In addition, the company manufactures display panels for industrial and other purposes.
In May, the Society for Information Display (SID) 2021, the world's largest display conference, honored LG Display's revolutionary 65-inch Rollable OLED TV with its Display of the Year award. The award should aid LPL in establishing a promising brand image among consumers and further boost its growth.
During the first quarter, ended March 31, 2021, LPL’s revenue increased 45.7% year-over-year to ₩6,883 billion ($6.09 billion). Its gross profit grew 343.2% from its year-ago value to ₩1,232 billion ($1.09 billion). LPL’s EBITDA increased 156.7% from the year-ago value to ₩1,620 billion ($1.43 billion) over this period.
LPL is expected to generate 36.8% revenue growth in the current year. Its EPS is estimated to increase 928.6% year-over-year to $1.74 in 2021. Over the past year, LPL’s stock has gained 113.8%. And it has gained 26.7% so far this year.
LPL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. LPL has an A grade for Value and a B for Growth. Among the 47 stocks in the B-rated Technology-Electronics industry, it is ranked #12. Click here to see the additional POWR Ratings for LPL (Sentiment, Quality, Momentum, and Stability).
Sonos, Inc. (SONO)
Santa Barbara, Calif.-based SONO designs, manufactures, and sells multi-room audio products globally. It offers a varied range of products that include wireless speakers, home theater speakers, components, and accessories. It sells its products through approximately 10,000 third-party retail outlets, including home audio system installers, e-commerce merchants, and through its own website.
Last month, SONO launched The Lighthouse, an exclusive new Sonos Radio HD station, in collaboration with Brian Eno, along with its expansion of Sonos Radio HD into Austria, Canada, France, Germany, and the Netherlands. This will help the company in evolving and expanding its market reach and enhancing its brand identity.
SONO’ revenue increased 90.2% year-over-year to $332.95 million in the second quarter, ended April 3, 2021. Its operating income came in at $12.39 million for this period, versus a $53.21 million operating loss in the second quarter of 2020. The company reported $17.22 million in net income for this period, compared to a $52.32 million net loss in the same quarter of the previous year. SONO’s EPS came in at $0.12 for this quarter.
The company’s EPS is expected to grow 600% year-over-year to $0.9 in the current year. The Street expects SONO’s revenue to increase 25.2% in its fiscal year 2021 and 8.9% in 2022. SONO’s stock has gained 132.9% over the past year and 50.6% year-to-date.
SONO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. SONO also has an A grade for Quality, and a B for Growth and Momentum. The stock is ranked #22 of 47 stocks in the Technology-Electronics industry.
In addition to the POWR Ratings grades we have just highlighted, one can see the SONO ratings for Value, Sentiment, and Stability here.
AAPL shares were trading at $136.09 per share on Thursday morning, down $0.87 (-0.64%). Year-to-date, AAPL has gained 2.89%, versus a 15.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.4 Consumer Electronics Stocks to Buy for the Second Half of 2021 appeared first on StockNews.com