Premium Audio And Licensing Partnerships Will Drive Strong Long Term Upside Potential

Catalysts

About Bang & Olufsen

Bang & Olufsen is a luxury audio company that creates high-end sound systems, headphones and speakers with a focus on design, technology and longevity.

What are the underlying business or industry changes driving this perspective?

• Acceleration of the global shift toward premium, design-led home and on-the-go audio is aligning with Bang & Olufsen’s positioning in luxury sound. This supports structurally higher pricing power, sustained gross margins above 50% and faster revenue growth than mass-market peers.
• Rising demand for integrated, software-driven consumer electronics benefits Bang & Olufsen’s proprietary Amadeus platform and connected portfolio. This enables higher attach rates, upselling into ecosystems and improved earnings from scalable R&D and software leverage.
• Expansion of immersive in-car and in-home entertainment is fueling growth in TV and automotive licensing partnerships such as TCL and HARMAN Hyundai. These partnerships create high-margin, asset-light revenue streams that can compound earnings with minimal incremental cost.
• Global growth in luxury consumption, especially in key urban hubs, supports the rollout of win city flagships and elevated mono-brand stores. This drives higher average ticket sizes, improves the channel mix toward branded retail and supports structurally better net margins.
• Increasing regulatory and consumer focus on sustainability and circularity favors Bang & Olufsen’s long-life products, Cradle-to-Cradle certifications and recreated classics program. This strengthens brand differentiation, defends premium pricing and supports long-term margin resilience.

Assumptions

This narrative explores a more optimistic perspective on Bang & Olufsen compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Bang & Olufsen's revenue will grow by 11.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1.1% today to 6.6% in 3 years time.
• The bullish analysts expect earnings to reach DKK 233.2 million (and earnings per share of DKK 1.58) by about December 2028, up from DKK -29.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.7x on those 2028 earnings, up from -71.3x today. This future PE is greater than the current PE for the GB Consumer Durables industry at 13.5x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.85%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Tariff uncertainty in the U.S. on products sourced largely from China and Europe could materially increase costs despite planned price hikes and dealer margin adjustments. This may weaken demand in the Americas and compress the record gross margin of around 55%.
• The company is entering a period of heavy investment, with CapEx guided to DKK 320 million to DKK 360 million and capacity costs expected to rise by about DKK 150 million, while revenue growth is only guided at 1% to 8%. This raises the risk that operating leverage does not materialize and EBIT margin drifts toward the lower end of the guided range from minus 3% to plus 1%.
• The strategy depends on expanding and upgrading mono brand stores and win cities at a time when store footfall is declining and some markets like Germany show lower momentum. This may limit sell out growth and put pressure on revenue and net margins if new stores fail to scale quickly.
• Brand partnering and license income are in transition, with HP revenues declining and TCL and automotive partnerships still ramping. Any delay in these new partnerships scaling or pricing pressure in lower tier Audio by Bang and Olufsen offerings could drag on high margin licensing revenue and group earnings.
• The outlook embeds only modest product launch activity and depends on second half weighted launches and a centenary marketing push to drive demand. Weaker consumer sentiment in Europe, the U.S. or China, or underwhelming reception of new products built on the Amadeus platform, would risk missing the 1% to 8% revenue growth range and undermining future margin expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Bang & Olufsen is DKK17.0, which represents up to two standard deviations above the consensus price target of DKK15.0. This valuation is based on what can be assumed as the expectations of Bang & Olufsen's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK17.0, and the most bearish reporting a price target of just DKK13.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be DKK3.5 billion, earnings will come to DKK233.2 million, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of DKK14.58, the analyst price target of DKK17.0 is 14.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.