Mobile Internet And Subscription Models Will Redefine Entertainment

Key Takeaways

• Rapid expansion of high-value partnerships and advanced monetization strategies position LiveOne for outsized revenue, subscriber growth, and margin improvement versus market expectations.
  
• Emphasis on digital innovation, automation, and new asset classes strengthens operational leverage, enhances recurring earnings, and creates unique avenues for shareholder value.
  
• Intense competition, high content costs, and recurring capital needs threaten profitability, market share, and shareholder value amidst rising industry challenges and commoditized offerings.

Catalysts

A digital media company, engages in the acquisition, distribution, and monetization of live music events, Internet radio, podcasting/vodcasting and music-related membership, and streaming and video content.

• While analyst consensus highlights new B2B deals and a large Fortune 500 partnership as major growth drivers, these projections may be too conservative: LiveOne is not only replacing, but materially surpassing the revenue potential lost from Tesla, with Fortune 500 partner access to over 30 million paying members and a rapidly expanding roster of 75 additional B2B partners in advanced discussions, setting the stage for exponential revenue and subscriber growth that could dwarf previous estimates.
  
• Analysts broadly agree that the transformation of the Tesla partnership should accelerate user conversion and advertising uptake, but they may underappreciate the magnitude; with aggressive ad insertion, superior AI-driven user targeting, and successful ARPU uplift from $3 to over $7, LiveOne is structurally positioned to drive both higher ad revenue per free user and a step-function increase in paid conversion rates, directly expanding both top-line and net margins beyond market expectations.
  
• The company's strategic move to monetize extensive video and audio content libraries-including 20+ TV/film projects, partnerships with streaming networks, and cross-platform distribution-uniquely tap the ongoing shift to on-demand, personalized, multi-format media, potentially unlocking recurring, high-margin licensing and syndication revenue streams that will enhance earnings quality.
  
• LiveOne's substantial cost rationalization, driven by AI-powered automation of content curation and significant workforce reductions, creates powerful operating leverage; as fixed costs remain controlled and new distribution channels scale, EBITDA margins are likely to expand meaningfully, delivering superior earnings growth and cash generation.
  
• The addition of a Bitcoin treasury strategy, Web3 initiatives, and NFT/tokenization of proprietary content positions LiveOne at the cutting edge of digital monetization trends, enabling new high-margin revenue avenues, increasing balance sheet strength, and opening up unique sources of shareholder value as alternative digital asset markets mature.

LiveOne Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on LiveOne compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming LiveOne's revenue will grow by 16.3% annually over the next 3 years.
• Even the bullish analysts are not forecasting that LiveOne will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate LiveOne's profit margin will increase from -22.6% to the average US Entertainment industry of 9.2% in 3 years.
• If LiveOne's profit margin were to converge on the industry average, you could expect earnings to reach $14.6 million (and earnings per share of $0.12) by about August 2028, up from $-22.7 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 29.5x on those 2028 earnings, up from -3.2x today. This future PE is lower than the current PE for the US Entertainment industry at 31.0x.
• Analysts expect the number of shares outstanding to grow by 2.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.71%, as per the Simply Wall St company report.

LiveOne Future Earnings Per Share Growth

Risks

• LiveOne operates in a highly competitive entertainment and music streaming market with major tech giants like Apple, Amazon, Google, and potentially new entrants from retail and tech, which risks increased customer churn and downward pricing pressure, potentially limiting revenue growth and market share gains.
  
• The company is heavily dependent on expensive and exclusive licensing, talent agreements, and live event productions, and if unable to successfully monetize or scale these content libraries and partnerships, net margins may be squeezed over time as fixed costs remain high.
  
• Long-term industry trends of escalating music licensing and royalty costs, along with increased bargaining power for artists and event holders, may lead to higher revenue-sharing agreements that reduce LiveOne's share of gross revenue and compress overall profitability.
  
• Record B2B deals and live event ambitions are highly contingent on executing large-scale partnerships and content launches; any delays, failed conversions, or inability to differentiate LiveOne's brand in an increasingly commoditized streaming landscape could result in revenue stagnation or missed targets.
  
• The company's recurring need to raise capital, including the recent $10 million equity raise and potential use of a Bitcoin treasury strategy, raises dilution risk for existing shareholders and signals ongoing pressure to fund operations and investments, which could negatively impact future earnings per share and shareholder value.

Valuation

• The assumed bullish price target for LiveOne is $2.7, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of LiveOne'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 $2.7, and the most bearish reporting a price target of just $2.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $158.3 million, earnings will come to $14.6 million, and it would be trading on a PE ratio of 29.5x, assuming you use a discount rate of 9.7%.
  
• Given the current share price of $0.64, the bullish analyst price target of $2.7 is 76.4% 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.