LiveOne is a Buy, says Roth Capital

Sticky revenue from its Tesla partnership and strong earnings growth projected over the next few years are just a couple of reasons investors should be tuning into streaming media company LiveOne Inc (LiveOne Stock Quote, Charts, News, Analysts, Financials NASDAQ:LVO). That’s according to Roth Capital Partners analyst Sean McGowan, who initiated coverage on the stock on Friday with a “Buy” rating and $2.80 target price.

Founded in 2015 and headquartered in Beverly Hills, CA, LiveOne (formerly LiveXLive) started out as a destination for fans of live music but has since expanded its terrain to include podcasts, internet radio, merchandise creation and sales and pay-per-view.

Among its assets, the company owns Slacker, an internet music and streaming service, and PodcastOne, publisher of dozens of podcasts and pay-per-view events. Revenue comes from subscriptions to Slacker, primarily from customers who purchase Teslas in North America who have a free trial period with the music service before converting to paying subscribers at $3.00 and $3.50 per month. LiveOne also gets revenue from sources including advertising on its podcasts, ticket sales for live music events and merchandise sales.

McGowan said LiveOne is in a rapidly growing market for streaming audio, while its in-auto audio streaming revenue with Tesla, currently representing over 40 per cent of LVO’s revenue, comes with some customer concentration risk but is ultimately a solid and continuing source of sales.

“LVO has created an ecosystem centred around live music and streaming audio and has seen rapid advances in its ability to monetize the networks across a growing range of revenue sources,” McGowan wrote.

“The company derives significant and, in our view ‘sticky’ revenue from auto-maker Tesla. LVO’s stake in soon-to-be spun-off PodcastOne could potentially provide significant share value realization beyond our target price,” he said.

The stock’s recent highs were in the $4-$5 range back in early 2021 but the year 2022 saw LVO treading water mostly around the $1 mark. So far in 2023, shares have climbed from $0.68 on Jan 1 to now around $1.39.

On its financials, McGowan said adjusted EBITDA growth is expected over the next several years, driven by increases in subscribers to its services and revenues from sales of merchandise and advertising. McGowan is forecasting revenue to go from $117.0 million in fiscal 2022 (year end June 30) to $99.1 million in fiscal 2023 and $113.8 million in fiscal 2024. EBITDA is expected to go from negative $13.4 million in 2022 to positive $12.4 million in 2023 and to positive $11.4 million in 2024. (All figures in US dollars.)

At press time, McGowan’s $2.80 target represented a projected one-year return of 99 per cent.

“The shares trade at a significant discount to the multiples of other public streaming media companies, although we expect LVO’s growth to be faster,” McGowan said.