Analysts Mostly Positive Following TiVo's Second Quarter
TiVo (NASDAQ: TIVO) reported its second quarter results on Tuesday after market close.
The company earned $0.08 per share, topping analysts expectations by a penny. Revenue of $111.85 million topped analyst expectations by $24.13 million.
TiVo's Service & Technology revenue rose 13 percent from a year ago to $86.6 million while MSO-related service revenue rose 36 percent to $10.3 million. TiVo-owned service revenue fell seven percent to $22.4 million while Other services revenue rose 29 percent to $4.2 million.
During the quarter TiVo saw its net income reduced to $9.3 million from $268.9 million a year ago. Last year's net income included $276 million related to the Cisco and Motorola litigation settlement.
TiVo added 263,000 subscribers during the quarter, an improvement from the 255,000 subscribers it added in the first quarter. The company ended the quarter with a total of 4.8 million subscribers, 33 percent more than it had a year ago.
Along with the quarterly results, TiVo announced a $350 million buyback program. The company plans to use $100 million of the buyback during fiscal 2015 with the remainder of the authorization being used over the next two fiscal years.
Lake Street: More solid execution
Mark Argento of Lake Street Capital Markets stated in a note to clients on Wednesday that TiVo posted another solid quarter with strong subscriber growth numbers.
“We remain encouraged by the progress TiVo is making on its MSO business and believe it is the key driver of long-term value creation,” Argento wrote. “Its large $350 million buy back is a strong vote of confidence in the business by the Board of Directors and we believe this should provide a floor for the stock.”
Argento notes that the company has $700 million in cash, and an additional $300 million in cash over the life of the settlement license period which does not include potential upside. The analyst adds that the current implied value of the enterprise remains less than $700 million.
Shares were reiterated with a Buy rating with an unchanged $15 price target.
Brean: Large addressable market
In a note to clients on Wednesday, Todd Mitchell of Brean Capital stated that there is a large addressable market for Tivo's offering and business model, however the company's quarterly results were a bit less than encouraging.
“When TiVo reported its second quarter results yesterday after the close the company's momentum was a little disappointing,” Mitchel wrote in a note. “Gross adds were up year-over-year, and Tivo seems to continue to enjoy strong traction with the Tier-2 U.S. MSO, but with Virgin appearing to scale back somewhat, overall growth appears to have decelerated fairly material from just last quarter”
According to Mitchell, TiVo will need to announce an expansion of its customer base within the next quarter, per management's assurances. Additionally, the analyst notes that an independent due diligence points to the likelihood of a deal with a large European MSO.
TiVo announced a new licensing win with Entouch, a Tier-2 MSO in Houston. Unfortunately, according to Mitchell, “this is not the big one that investors have been waiting for.”
Mitchell concludes that any weakness in shares following Tuesday's quarterly results should be considered an opportunity for investors to “be more aggressive.”
Shares were reiterated with a Buy rating with an unchanged $16 price target.
National Alliance: Big Buybacks Equals Big Price Targets
Brian Coyne of National Alliance Securities stated that TiVo is at a transformational phase in terms of its business model and Wall Street's perception and valuation from a retail-oriented DVR provider to a scalable software play.
“Its second quarter results reflected continued progress in this transition, with in-line subscriber growth at international Tier 1 MSOS and mid-sized domestic cable operations along with strong (though very early) growth in its video discovery platform,” Coyne wrote in a note to clients. “We expect the shares' valuation to expand as management executes on its plan and investors reassess the company and its improving cash flow profile.”
According to Coyne, TiVo's cash has been a strategic asset that the company relied upon to create shareholder value through acquisitions and share repurchases. The analyst adds that the company's $350 million buyback announcement should be a “catalyst” for shares. Additionally, the buyback announcement will reward the more event-driven investors that have remained in the stock over the years.
Shares were reiterated with a Buy rating with an unchanged $18.50 price target.
Elsewhere on the Street
Analysts at Barrington reiterated an Outperform rating with an unchanged $20 price target.
Analysts at FBR Capital maintained a Market Perform rating with a price target raised form $11 to $12.
Latest Ratings for TIVO
|Aug 2014||FBR Capital||Maintains||Market Perform|
|Jun 2014||National Alliance||Initiates Coverage on||Buy|
|Mar 2014||JP Morgan||Downgrades||Overweight||Neutral|
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