Small digital entertainment action ideal for upstream investors


Through George Leong, B.Comm. Posted: 20 October 2021

LiveOne Inc provides entertainment for the digital age

During the COVID-19 pandemic, the ability to attend live entertainment events has been discontinued and moved to the digital space. Businesses providing digital entertainment have come to the fore, but with the economy reopening, people have returned to live entertainment.

Despite the transition, I believe 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 live and on-demand audio, video and podcast content in music, comedy, pop culture, sports and other genres of entertainment. .

LiveOne Inc is well positioned in the streaming entertainment space.

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

LVO’s stock is well oversold

The LiveOne stock chart below shows a first break of a downward channel in late November 2020 and a second break in December to a 52 week high in March 2021.

Unfortunately, the momentum for smaller growth stocks like LiveOne Inc has faded and the price of LVO shares has steadily declined.

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

Chart courtesy of StockCharts.com

Strong growth is expected to continue

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

Clearly, the pandemic resulted in a significant increase in income in fiscal year 2021 as many people were confined to their homes.

Fiscal year Income Growth
2017 $ 225,000 N / A
2018 $ 7.2 million 3098%
2019 $ 33.7 million 368.4%
2020 $ 38.7 million 14.7%
2021 $ 65.2 million 68.7%

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

The relative valuation of LiveOne is attractive. LiveOne Inc is trading at just 2.1 times its FY2021 revenue. Compare that with the staggering 16.3 times for Live Nation Entertainment, Inc. (NASDAQ: LYV).

I see this as a major opportunity for investors in LVO shares.

In addition, LiveOne Inc has controlled its expenses and moved towards generating income before interest, taxes, depreciation and amortization (EBITDA) and profitability.

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

Fiscal year EBITDA (millions) Growth
2017 – $ 5.5 N / A
2018 – $ 11.5 -111.3%
2019 – $ 36.4 -128.9%
2020 – $ 27.7 -4.8%
2021 -20.4 $ 26.3%

(Source: MarketWatch, op. cit.)

As for the path to profitability, LiveOne Inc is probably still years away. The plus is that the loss of earnings per share (EPS) according to the generally accepted accounting principles (GAAP) of the company decreased during the last two years published.

Fiscal year GAAP diluted EPS Growth
2017 -0.44 $ N / A
2018 -0.59 $ -34.1%
2019 -0.73 $ -23.3%
2020 – $ 0.69 4.8%
2021 – $ 0.61 12.6%

(Source: MarketWatch, op. cit.)

The company’s free cash flow (FCF) was negative. It was expected, but I would look for an improvement in LiveOne Inc’s FCF as its revenue increases.

Fiscal year FCF (millions) Growth
2017 – $ 3.1 N / A
2018 – $ 5.8 -83.8%
2019 – $ 8.3 -43.8%
2020 – $ 8.2 1.5%
2021 – $ 12.7 -55.5%

(Source: MarketWatch, op. cit.)

The financial situation of LiveOne is currently not a problem. 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 added LiveOne actions. LiveOne Inc has a small market valuation of $ 228.0 million, but 104 institutions have a 42.2% stake in the outstanding shares of LVO. (Source: Yahoo! Finance, op. Cit.)

In addition, insiders have added 2.6 million shares in the past six months. The purchase was large, carried out on 108 transactions.

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


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