LiveOne Stock: At a 60% Discount, Tiny Digital Entertainment Stock Ideal for Contrarians

LiveOne Inc Provides Entertainment for the Digital Era

During the COVID-19 pandemic, the ability to attend live entertainment events halted and moved to the digital space. Companies that provide digital entertainment came to the forefront, but with the reopening of the economy, people have been heading back to live performances.

Despite the transition, my view is that the demand for live and recorded entertainment will continue to be strong. To play this, investors might want to consider LiveOne Inc. (NASDAQ:LVO).

The company offers a subscription-based platform with access to livestream and on-demand audio, video, and podcast content in music, comedy, pop culture, sports, and other entertainment genres.

LiveOne Inc is well positioned in the streaming entertainment space.

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Given that LVO stock is down by 60% from its 52-week high of $6.95 in March 2021 and down by even more from its price of $90.00 in August 2017, I like the current risk/reward situation.

LVO Stock Is Way Oversold

The below LiveOne stock chart shows an initial breakout from a downward channel in late November 2020 and a second breakout in December to a 52-week high in March 2021.

Unfortunately, the momentum for small growth stocks like LiveOne Inc faded, and the price of LVO stock has steadily drifted lower.

LVO stock is below its 50-day and 200-day moving averages in a bearish death cross pattern, but I see it as an aggressive contrarian opportunity.

Chart courtesy of StockCharts.com

Strong Growth Expected to Continue

A glance at LiveOne Inc’s five-year revenue picture points to significant fiscal growth. The fact that its revenues jumped from $225,000 in fiscal 2017 to $65.2 million in fiscal 2021 is staggering.

Obviously, the pandemic drove a major revenue surge in fiscal 2021 as many people were confined to their homes.

Fiscal YearRevenuesGrowth
2017$225,000N/A
2018$7.2 Million3,098%
2019$33.7 Million368.4%
2020$38.7 Million14.7%
2021$65.2 Million68.7%

(Source: “LiveOne Inc.” MarketWatch, last accessed October 15, 2021.)

The relative valuation for LiveOne stock is attractive. LiveOne Inc trades at a mere 2.1 times its trailing fiscal 2021 revenues. Compare this with the staggering 16.3 times for Live Nation Entertainment, Inc. (NASDAQ:LYV).

I view this as a major opportunity for LVO stock investors.

Moreover, LiveOne Inc has been controlling its expenses and moving toward producing earnings before interest, taxes, depreciation, and amortization (EBITDA) income and profitability.

The company’s five-year EBITDA stream shows a big improvement in fiscal 2021, and I expect this to continue.

Fiscal YearEBITDA (Millions)Growth
2017-$5.5N/A
2018-$11.5-111.3%
2019-$36.4-128.9%
2020-$27.7-4.8%
2021-$20.426.3%

(Source: MarketWatch, op. cit.)

As far as the pathway to profitability goes, LiveOne Inc is likely still years away. The plus is that the company’s generally accepted accounting principles (GAAP) earnings-per-share (EPS) losses narrowed in the last two reported fiscal years.

Fiscal YearGAAP Diluted EPSGrowth
2017-$0.44N/A
2018-$0.59-34.1%
2019-$0.73-23.3%
2020-$0.694.8%
2021-$0.6112.6%

(Source: MarketWatch, op. cit.)

The company’s free cash flow (FCF) has been negative. This was expected, but I would look for improvement in LiveOne Inc’s FCF as its revenues ratchet higher.

Fiscal YearFCF (Millions)Growth
2017-$3.1N/A
2018-$5.8-83.8%
2019-$8.3-43.8%
2020-$8.21.5%
2021-$12.7-55.5%

(Source: MarketWatch, op. cit.)

LiveOne’s financial condition isn’t currently an issue. The company had $24.6 million in cash and $28.7 million in debt at the end of June. (Source: “LiveOne, Inc. (LVO),” Yahoo! Finance, last accessed October 15, 2021.)

Analyst Take

Institutions and insiders have been adding LiveOne stock. LiveOne Inc has a small market valuation of $228.0 million, but 104 institutions hold a 42.2% stake in the outstanding shares of LVO stock. (Source: Yahoo! Finance, op. cit.)

Furthermore, insiders have added a whopping 2.6 million shares over the last six months. The buying was broad, done over 108 transactions.

LiveOne Inc is a high-risk contrarian tech stock, but given its price deterioration, it may be time for investors to look at it.