Brean Capital Believes Ease of 1Q14 Upside Shows New Conservatism from Rovi

In a report published Thursday, Brean Capital analyst Todd Mitchell reiterated a Buy rating and $27.00 price target on Rovi ROVI. In the report, Brean Capital noted, “More evidence Rovi is getting its house in order. Refocused on execution, Rovi reported 1Q14 results ahead of our estimates and consensus on strong growth in Service Provider and a one-time ACP fee in Other revenue. Consequently, management raised the mid-point of 2014 revenue guidance to $535 million and maintained post-Veveo non-GAAP EPS guidance of $1.50-$1.80. "We believe Rovi is gathering momentum with the potential for upside from multiple fronts, including 1) an uptick in licensing fees for subs divested from Comcast (CMCSA, Buy, $51.76) and Time Warner Cable (TWC, Buy, $141.46) 2) broader adoption of expanded use cases of its patents and international expansion of deals and 3) an enhanced cloud service offering via the recent acquisition of Veveo and organic expansion of its metadata footprint. We rate ROVI a Buy with a price target of $27 which is based on 13.0x our 2014 EPS estimate of $1.80 and 11.5x our 2015E EPS estimate of $2.20.” Rovi closed on Wednesday at $22.29.