Brean Capital Reiterates Buy on TiVo (TIVO) Following 2Q16
Brean Capital reiterated a Buy rating and $14.00 price target on TiVo (NASDAQ: TIVO) following the company's 2Q16 earnings report. TiVo reported a 14% increase in Service & Technology revenue to $99.1 million and a 9% increase in adjusted EBITDA of $32.4 million, both ahead of guidance and consensus estimates. Non-GAAP EPS of $0.09 was up modestly from $0.08 a year ago, while Cash at the end of F2Q16 stood at $713 million, which was modestly up from $647 million at F2015 year end.
Analyst Todd Mitchell commented, "TiVo reported solid F2Q16 subscriber momentum and better-than-expected revenue and adjusted EBITDA. Management affirmed expectations for this to continue for the remainder of the year and announced plans to introduce a new TiVo retail offering in F2H16. However, shares continue to lag even with an aggressive capital return program. We believe this is because the market questions the veracity of TiVo’s IP licensing revenue and its ability to continue to grow its sub base with no real sponsorship from any of the consolidating entities among its customer base. TiVo is addressing the former with new claims of IP infringement against Samsung and the latter with a strategy of moving towards a larger addressable market by fielding a greater strata of offerings as opposed to a single turnkey solution through its acquisition of Cubiware and offering of overlay services such as Digitalsmiths. We believe TiVo’s shift towards lighter, lower ARPU solutions has the potential to offer upside to current consensus projections for the company, and, as a result, we reiterate our Buy rating and $14 target price."
Mitchell also added, "TiVo guided to F3Q16 revenue of $101-to-$103 million and adjusted EBITDA of $38-to-$31 million. We are projecting F3Q16 revenue of $102 million and an above-guidance adjusted EBITDA of $33 million. For the full year, we look for revenue of $399 million and adjusted EBITDA of $128 million. Our estimate assumes 288,000 net adds in F3Q16 and a total of 1.128 million net adds for the full year, which would leave TiVo with a total of 6.654 subs at F2016 year end, up 22% from 5.472 million at F2015 year end. Our new F2015 estimate represents a modest increase in revenue and a modest decrease in F2015 adjusted EBITDA, with revenue up on a mix shift in our net add forecast, with O&O net adds up slightly and licensed net adds down slightly, which should generate higher ARPU, but along with increased promotional spending and higher legal expense."
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Shares of TiVo closed at $9.10 yesterday.