Digital Rivals Will Restrict Deals While Future Potential Emerges

Key Takeaways

• Increasing competition, reliance on third-party deals, and shifting consumer habits may limit LiveOne's growth and challenge its long-term profitability.
  
• Operational improvements and balance sheet actions offer support, but persistent external risks threaten margin stability and recurring revenue sustainability.
  
• Reliance on risky new B2B deals, aggressive cost cuts, and volatile digital asset strategies create significant uncertainty for operational stability and long-term growth.

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 LiveOne is positioned to benefit from the rapid expansion of digital media consumption and high-speed connectivity-including the launch of a significant B2B partnership with a Fortune 500 company and a promising Amazon deal-these opportunities may not fully materialize due to intensifying competition from both major tech firms and growing industry consolidation, which could squeeze LiveOne out of lucrative partnerships and distribution channels, limiting the top-line impact these initiatives are expected to have.
  
• Even though the company is leveraging AI-driven content curation to cut expenses and improve operational leverage, ongoing high customer acquisition costs and the risk of heightened consumer fatigue with new subscription services raise concerns that LiveOne could struggle to achieve sustainable subscriber growth or see elevated churn, putting recurring revenue at risk.
  
• The strategy to monetize exclusive content, live events, and expansion into digital collectibles/NFTs is intended to drive incremental high-margin revenue streams, yet persistent reliance on third-party licensing for content leaves LiveOne exposed to rising royalty costs and contentious negotiations. This could compress gross margins and undermine long-term profitability, even as new revenue streams are developed.
  
• Despite the significant clean-up of the balance sheet-bolstered by new financing, staff reductions, and the recent equity raise-the company's path to sustained positive net earnings remains unclear due to the unpredictable and lumpy nature of live event revenue and the risk that macroeconomic volatility or regulatory shifts in global data privacy could elevate compliance costs and operational complexity, further pressuring earnings.
  
• While strategic buybacks and growing optionality from possible M&A, subsidiary sales, and expansion into adjacent verticals provide some valuation support, the advent of direct artist-to-fan platforms and rapid shifts in digital media preferences could make intermediary offerings less relevant, potentially eroding LiveOne's future growth prospects and its ability to command improved revenue multiples over time.

LiveOne Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on LiveOne compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming LiveOne's revenue will grow by 16.2% annually over the next 3 years.
• The bearish 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 bearish analyst cohort, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, up from -3.2x today. This future PE is lower than the current PE for the US Entertainment industry at 32.1x.
• Analysts expect the number of shares outstanding to grow by 2.56% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.67%, as per the Simply Wall St company report.

LiveOne Future Earnings Per Share Growth

Risks

• The company's recent loss of significant Tesla partnership revenues and ongoing need to make up for lost Tesla-related income creates ongoing risk to near-term and medium-term revenue stability, especially given references to a slow buildup of new B2B deals and that these new deals are only beginning to contribute incremental revenue.
  
• LiveOne's ambitious B2B subscriber partnership projections are speculative, as evidenced by management's acknowledgment that uptake in key partnerships depends on high opt-in rates and conversion that are not guaranteed, introducing considerable risk to revenue ramp and overall top-line growth.
  
• The company's substantial reliance on signing, renewing, and scaling major B2B deals leaves it vulnerable to the long sales cycles, potential partner delays, and contract concentration risk, while ongoing references to a need to recover from the loss of Tesla and slow B2B partner launches suggest limited operational leverage and potential revenue volatility over both the short and long term.
  
• Aggressive cost reductions, including a 31% staff cut and notable downsizing at the Slacker technology team, may impact product execution, innovation, and support for existing and future B2B partnerships, potentially endangering long-term competitive advantage and future profit margins if operational service quality or technology delivery suffers.
  
• The company's newly announced Bitcoin treasury strategy and focus on NFT/tokenization revenues introduces considerable financial risk due to the inherent volatility of digital assets, regulatory uncertainty, and uneven demand cycles, which could lead to balance sheet and earnings volatility and distract management from core operational execution.

Valuation

• The assumed bearish price target for LiveOne is $1.4, which represents the lowest 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 more bearish 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 $1.4.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $157.9 million, earnings will come to $14.6 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 9.7%.
  
• Given the current share price of $0.65, the bearish analyst price target of $1.4 is 53.6% 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.