Vizio (VZIO) Gains as Street Overwhelming Bullish, Seen as Well-Positioned to Capitalize on Booming Streaming Video Market

April 19, 2021 9:07 AM EDT
Get Alerts VZIO Hot Sheet
Price: $27.00 -4.36%

Rating Summary:
    7 Buy, 0 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 19 | Down: 13 | New: 24
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At least seven Wall Street firms started their coverage on Vizio Holding Corp. (NYSE: VZIO) with a “Buy” rating or equivalent as the company looks well-positioned to capitalize on the fast-growing video-streaming market.

Piper Saldner, BofA, JP Morgan, Roth Capital, Needham & Company, Guggenheim, and Wells Fargo are among Street firms that have initiated positive coverage on VZIO, which started trading publicly on March 25. Vizio priced 12.25 million shares at $21 per piece, but the stock plunged 9% on the first day to close at $19.10.

Although Vizio was first known for selling high-definition TVs in the U.S., the company transformed its business model to focus on streaming services. Its flagship product, SmartCast, offers subscriptions to Netflix, Amazon Prime Video and Disney Plus and connects advertisers and customers.

“We’re very unique because we focus on hardware and software. In my opinion, someone has to put everything together,” said founder William Wang last month.

Guggenheim analyst Michael Morris started the coverage of VZIO with a “Buy” rating and a $28.00 price target. He believes the company is “well positioned to capitalize on the streaming video market growth through its powerful combination of high-quality, affordable television hardware and award-winning streaming operating system (OS).”

“We expect the company to continue its account growth (from 12.2mm domestic active) and its advertising partnerships, fueling strong Platform (+~45% 3-year CAGR) and consolidated company (~15%) gross profit growth as detailed within. Over the long term, we believe ongoing investment in OS innovation will position the company for additional global growth opportunities across the connected home. At its current valuation, we see VZIO shares as an attractively priced streaming media investment relative to peers,” Morris writes in today’s note sent to clients.

Similarly, Needham analyst Laura Martin started with a “Buy” and a $30.00 price objective as the company could follow Roku’s (ROKU) model to “rapidly accelerate its ROIC by adding 65% gross margin Platform+ revenue to Vizio's 5% gross margin Smart TV sales.”

“We believe Vizio has LT platform economics upside, with robust CTV advertising revenue upside in 2021. Mirroring Roku’s transition, we expect Vizio’s valuation multiple to expand with Platform+ revenue growth over the next 24 months, aided by the fact that its Platform+ revenue is growing 20x faster than its Device revenue. In addition, Platform+ gross profit dollars will "cross over" in the near-term, becoming larger than the Device gross profit dollars in 1Q21, we estimate. For FY21, we project Platform+ gross profit of $156mm, which is 56% higher than the $100mm we project for Devices,” the analyst said in a memo.

The average price target among the 7 firms that launched coverage is $30, suggesting 20% upside to current levels.

Shares of Vizio are up 2% in pre-open Monday.

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