Noble initiates on Alliance Entertainment with 'buy', 70% upside on margin growth

Investors should take a closer look at Alliance Entertainment Holding, a small-cap distributor of vinyl records and Paramount’s exclusive partner for physical media in North America, says Noble Capital Markets in a recent coverage initiation report. The company is on the verge of significant profitability gains, and its shares remain undervalued, analysts believe.

Noble Capital Markets has initiated coverage of Alliance Entertainment shares with an "outperform" rating and a target price of $11 per share, implying upside of 69% from the closing price yesterday, October 7, of $6.49 per share.

The target price is based on an 2026 EV/EBITDA multiple. According to Noble, Alliance trades at 7.5 times 2026 adjusted EBITDA, while peers trade at about 11.0 times, leaving potential for rerating as profitability expands.

Alliance Entertainment distributes vinyl records, music CDs, Blu-ray and 4K movies, video games, electronics, and collectibles. The company caters to a unique base of physical media enthusiasts and collectors, offering licensed products and exclusive content not available elsewhere, analysts note.

Some of the company’s business lines are mature, but there are attractive growth opportunities in developing higher-margin categories, Noble wrote. Among these, analysts highlight Handmade by Robots, a producer of licensed collectible figurines that Alliance acquired in December 2024.

Another major profitability driver is the exclusive Paramount Pictures license obtained in January, which added one of the industry’s largest film and TV catalogs to Alliance’s platform. The company’s network spans more than 200 online retailers, and 35,000 brick-and-mortar stores, and it also sells directly through Amazon, TikTok, eBay, Temu, and Shein.

Together, these factors should lift adjusted EBITDA by 69% to $51.5 million in fiscal 2026, which began on July 1, Noble forecasts. Earnings per share are expected to more than double to $0.55 per share for the same period, with another 20% increase to $0.68 per share in fiscal 2027. Analysts describe these projections as conservative, noting that faster product rollouts could deliver pleasant surprises.

Noble warns that Alliance remains dependent on several key suppliers and customers, which represents one of its main investment risks. The loss of major partners, or changes in contract terms, could significantly affect revenue. In fiscal 2025, revenue declined 3.6% to $1.06 billion, even as net income rose 229% to $15.1 million, thanks to margin expansion.

The company also faces structural challenges from the ongoing shift in consumer demand toward digital media. In addition, Noble notes execution risk tied to future acquisitions and integration, as well as macroeconomic factors such as inflation, interest rates, trade policy changes, and supply chain disruptions.

Alliance Entertainment shares have risen 131% over the last 12 months but are down 28% year to date.

According to MarketWatch data, all three analysts covering the company rate the stock a "buy," with an average target price of $10.33 per share, implying about 59% upside from current levels.

The AI translation of this story was reviewed by a human editor.