Vizio Holding Corp (NYSE:VZIO) is an Irvine, California-based consumer electronics brand that went public in a March 2021 IPO. The company’s TVs and sound bars are very affordable, which is a stark contrast to the pricing policy of good sold by Sony Group Corp (NYSE:SONY).
VZIO share price is also more affordable than its high-end competitor, but which is the better buy between Sony stock vs Vizio?
Both companies sell a wide variety of products while also providing data and advertising. Sony has a much larger pipeline however, plus it’s a globally recognized, well-respected brand that is renowned for selling high quality goods and electronics.
Vizio is a more affordable distributor which is helping it to become a household name. Having risen to a valuation north of $4 billion, it’s still a minnow in the ocean of whales such as Sony, though potentially that means it has more upside potential. After all a 50% upside in Vizio translates to $2 billion while for Sony a $75 billion is required to generate the same percentage return for investors.
Is Vizio A Reliable Brand?
Vizio provides trusted products at affordable prices. Consumer Affairs rates the brand at 3.3 out of 5 with over 500 ratings, and the reviews are mostly positive.
This positions Vizio as an average brand. That hasn’t hurt its market share. The company holds about 13 percent of the smart TV market, and this market is elbowing in on the streaming stick market.
Its SmartCast operating system is perfectly positioned to benefit from the trends in TV usage and competes with the likes of Roku (NASDAQ:ROKU), Fire TV, and Chromecast. But it also faces competition from Sony.
Sony Corp Has An Ecosystem
Sony Group Corporation is a Japanese conglomerate that includes divisions for video games, music, moves, and both consumer and professional electronics. It’s the largest music publisher, image sensor manufacturer, best-selling home video game console, and premium television maker.
The media and technology giant is known for creating high-quality products that come with a premium price tag. It’s also known for creating its own ecosystem much like Apple (NASDAQ:AAPL) – the Sony PlayStation has its own proprietary OS, store, services, and content.
Sony is valued at a market capitalization of well over $150 billion, making it one of the most valuable companies in the world. However, as a foreign company listed on the Tokyo Stock Exchange, American investors are buying American depositary receipts.
Sony Digital Strategy Is Paying Off But…
Although it’s a major play in consumer electronics, Sony’s strategy is focused heavily on streaming during the current console generation. Digital services like PS Plus and PS Now are a major part of the company’s overall strategy for the 2020s.
While Sony’s digital strategy has been paying off, the most recent SEC quarterly filing dove into the firm’s risk factors. For example, Sony’s PlayStation 5 launch, while successful, faced shortages throughout its supply chain due to manufacturing shutdowns and silicon chip shortages.
Despite these challenges, the company grew year-over-year sales by 13 percent in its most recent quarter. This was fueled by over-20-percent increases in both its Game and Network Services and Electronics Products and Solutions divisions.
But with the next generation already in full swing, some wonder if Sony may have peaked for the time being.
Vizio Corp Financials Are So-So
Vizio generated over $906 million in the first half of the year, an increase of $180.81 million, or 24.9 percent from the prior year’s tally. That translated to a gross profit of $166.204 million for the period, although it still ended with a $10.66 million net loss.
The TV and soundbar maker held assets of $763.82 million compared to $460.63 million in debt and liabilities, making for a healthy balance sheet as the company increased its cash on hand by over $365 million, more than double its take by the end of last year.
Vizio’s 2022 collection is on its way, and the holiday season sales and CES 2022 buzz should boost the top line. It has a large user base over 11 million smart TVs with dynamic ad insertion, creating a smart platform to generate ad revenue.
Is Vizio Stock a Good Buy?
Vizio has an average consensus rating of buy; it’s relatively cheap compared to the rest of the market.
It has a potential upside of over 70 percent, and much of this depends on the success of content services. The modern smart TV market is a sleeper hit – we saw with Roku monetizing its platform using strategically targeted ads.
Although market share is shrinking due to more entrants, Vizio stock is generally considered a good buy under a $5 billion valuation.
Some estimates place the VZIO market cap almost 40% higher at around $30 per share.
Is It Too Late to Invest in Sony?
It may be a large global conglomerate and market leader, but there’s still room for Sony to grow. The company’s price-to-earnings of 13 is a steal compared to the eye-popping 70 for Vizio.
The gaming division continues to outsell competition from Microsoft and Nintendo, and its partnerships with companies like Peloton Interactive (NASDAQ:PTON) help to maintain the moat for its streaming services.
Don’t discount the growth potential of this never-sleeping giant.
Vizio Stock Vs Sony: The Bottom Line
Vizio and Sony operate on two different ends of the consumer electronics market. Vizio is a smart TV pioneer that is building a growing user base thanks to enticing, low-priced products. It can afford to keep costs competitive because advertising revenues are also generated on the back-end.
On the other end of the spectrum, Sony sell high-end products and continues to remain a market leader in many of its divisions. Both stocks are trading at a discounted to fair value based on discounted cash flow forecast analyses but Vizio has the higher upside.
The bottom line is each brand has the potential to outperform the market in general over the next year but Vizio has the more alluring payoff if it executes well.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.