Albert Fried Bullish on TiVo's (TIVO) Romeo Platform

October 24, 2013 3:53 PM EDT
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Albert Fried analyst Rich Tullo is positive on news from TiVo (NASDAQ: TIVO) about home streaming on its Romeo platform

"In our view, ROMEO is the first demonstration of TIVO's technology innovation resulting from the synergy between TIVO's patent settlements which include new tech licenses and its scary but necessary $100 million annual commitment to R&D," he said.

He elaborated further:

  • For example, Google can't yet stream last night's baseball game to your laptop , Modern Family to your wife's iPhone, and Kickin iT to your daughters iPad Mini. Sure if you wait a year you get the old TV on Netflix (sans baseball) and yet some industry leaders think the TIVO enabled aggregation has little value? In our view, if you don't the see the value you are not focused on the consumer.

  • To be clear, we think roughly 500,000 of the subs NFLX added in 3Q13A were directly related to I) Breaking Bad and The Walking Dead by AMCX (MP, $85) and II) on International we think TIVO's in the UK and Scandinavia added 40,000 to 100,000 subs - maybe lots more.

  • We think investors are mired in the concept that TIVO is the Company welded to DVR. In our view that's untrue and akin to saying Apple in 2004 was a company welded to the iPod.

  • In our view, TIVO is a double envelop company where Cloud TV and its best in class user interface enable new Advertising, New Services, and New ways of delivering content where they w ant and when they want. Today TiVO, in our view, is more in the business of making other services work with a DVR and VOD rather than making a DVR and VOD work with other businesses.

  • In terms of its direct to consumer business, TIVO is starting to be positioned as the BOSE of TV and Romeo is the TV Machine. Romeo does cost a lot but its better TV in our view.

  • Ultimately cable is faced with 3 to 4 options to deliver the TV of Tomorrow. Its clear to us TIVO can make the case with smaller MPVDs with subscribers ranging from 50,000 to 5 Million th at TIVO is the TV of tomorrow today.

  • Thus we think our $106 million EBITDA estimate for 2014E really represents the easy money estimate as TIVO should get about $70 million from settlements and an additional $36 million from absence of legal fees. Quite frankly, we wish we were smart enough to build a model with fine detail b ut we think the value is so compelling with TIVO that’s a discussion that needs to be tabled until about $20 per share.

  • To be clear, we think TIVO at $13 is an acquisition target given the strategic value re presented by TIVOs patents, TIVO's strong balance sheet and nose in the tent of MVPD's that have 78 million subs in aggregate, suggests to us that the premium could be large or investors are better served by no deal.

    The analyst reiterated an Overweight rating and price target of $23.00.

    For an analyst ratings summary and ratings history on TiVo click here. For more ratings news on TiVo click here.

    Shares of TiVo closed at $13.49 yesterday.

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