The Knife Has Fallen' At Rovi Corp, Investors Can Now Think About Stock, Brean Says

In a report published Friday, Brean Capital analyst Todd Mitchell maintained a Buy rating on Rovi Corporation ROVI, with a price target of $31. Rovi's shares declined by 20 percent on July 17, after a "worst-case scenario" ruling in an IP case against Netflix, Inc NFLX. The ruling granted Netflix a motion of summary judgment that invalidated all five or Rovi's patents being contested in the case. Analyst Todd Mitchell noted that the "market is overweighting linkage between that case and Rovi's ability to renew key licensing deals with large U.S. service providers within the next year." "We believe that there is validity in Rovi's IP claims, particularly in the service provider ecosystem, which are reinforced legally by its corresponding products business, and lubricated by its ability to provide service provider licensees with technology and applications which are critical to their service profile," Mitchell added. Rovi had recently signed multi-year renewals with several companies. Apart from this, there is little likelihood of the cancellation of the company's existing deals with over-the-top licensees like Google Inc GOOGL GOOG, Hulu and Yahoo! Inc YHOO. A renewal of Rovi's service provider deals is also likely in 2016, thus allowing the company to return to double-digit EPS growth levels in 2016 and 2017. In the report Brean Capital noted, "…with yesterday's ruling we believe Rovi's potential negative catalysts are behind it and investors can now become more constructive on the stock."