|Apple Makes Licenser Dolby Sparkle |
by Dougherty & Co.
The company, which develops and licenses audio and imaging technologies, will report fiscal fourth-quarter results on Oct. 25.
There’s a growing ecosystem around Vision, Dolby’s high-definition imaging technology—boosted most recently by Apple licensing it for the Apple TV 4K, iPad Pro, and the iPhone 8, 8S, and X.
Dolby is well-positioned to accelerate revenue and expand margins. We believe guidance, and our estimates, remain conservative, laying the groundwork for further outperformance.
We are reiterating our Buy rating and $63 price target, which is based on 17 times our non-GAAP calendar year 2018 EPS of $3.08 plus the $11/share in cash on the balance sheet. The company’s dominant competitive position, strong cash flow, increased traction with new revenue initiatives, and potential for material operating margin expansion justify the multiple. The stock is currently trading at 15.6 times calendar 2018 EPS ex-cash.