UBS’s Brian Fitzgerald starts coverage today of TiVo (TIVO) with a Buy rating and a $13 price target, writing that the company has just crossed an “inflection point”: the change in subscriber trends the company’s Q3 report two weeks ago, when it added subscribers after years of declines.
“We believe sub gains should persist in coming qtrs as penetration is ramping fast on current deals,” writes Fitzgerald.
“And we think new deals are likely as operators look to rapidly deploy broadband enabled set-top boxes after witnessing competitors�� success with TIVO.”
TiVo could benefit as viewing of “long form” content moves from the traditional television setup more and more to the Internet: Online “viewing sessions” rose 32% in August, to 6.9 billion, he writes, according to ComScore data.
Moreover, only three of eight recent deals TiVo has signed have hit the income statement so far, “giving us confidence subscriber growth will accelerate” as the other deals come online.
Finally, regarding the company’s patent trove, Fitzgerald offers that using recent quotes for patents (the Google (GOOG) deal for Motorola Mobility (MMI), for example), TiVo’s patents may be worth in the neighborhood of $1.29 to $3.61, though Fitzgerald settles on the $1.29 figure to produce his sum-of-the-parts valuation of $13.
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