TiVo Slides to 52-Week Low: What's Dragging It Down?

Shares of TiVo Inc. TIVO plunged to a new 52-week low of $8.32 on Jan 4 and eventually closed at $8.34, representing a one-year decline of 24.9%. Average volume of shares traded over the last three months was more than 837K.

Why the Plunge?

The decline was primarily due to intense competition from cable and satellite providers, who offer bundled up DVR service with digital cable in one set-top box at comparable monthly subscription rates and without any upfront costs. It faces significant competition from a number of companies, which have created competing DVR technologies and offer attractive licensing agreements to service providers and manufacturers of DVRs, thereby leaving little to no scope for differentiation. The company is also facing significant competition from Google TV, Roku and Apple AAPL TV.

Also, the current challenging economic environment and intense competition in the DVR business have made operations more difficult. As a result, TiVo has been increasing its research and development (R&D) costs to stay ahead of competition, which will continue to hurt its profitability, going forward.

Further, TiVo faces supplier concentration risk as it relies on sole suppliers for a number of key components needed for the DVRs and the TiVo service. For example, Broadcom BRCM is the sole supplier of the system controller for DVRs, while Tribune is the sole supplier of the program guide data for the TiVo service. This concentration could lead to significant delay in launching new products, an increase in expenses or disruption in product or service availability at TiVo.

Moreover, over the last 60 days, all the estimates for 2016 moved southcausing the Zacks Consensus Estimate to drop by 15.2% to 28 cents per share.

Currently, TiVo carries aZacks Rank #3 (Hold).

Stock to Consider

A better-ranked stock is NXP Semiconductors NV NXPI, sporting a Zacks Rank #1 (Strong Buy).

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