Taser International (TASR), TiVo (TIVO) and Radio Shack (RSH) Look For Reversal of Fortunes in Recently Lagging Stock Prices; Eastman Kodak (EKDKQ.PK) Re-Emergence From Chapter 11 Imminent
Long revered for revolutionary innovations, recently laggard companies such as Taser International, TiVo and Radio Shack look to drum up support. These recently beleaguered and seemingly aimless companies have had great volatility in their share prices over the last six months.
New product developments, the conclusion of litigation issues and new management are some of the key factors that will drive these three companies to higher valuations and extended coverage in the future.
Along with Eastman Kodak (EKDKQ.PK) emerging from bankruptcy on September 3rd, these past glory companies will have a very interesting future given upcoming events that could prove quite compelling catalysts for positive gains in their stock prices.
Roamio, Where Are Thou
TiVo announced itsr Roamio device, counting on the notion that avid television viewers and the future are geared towards a "media server" type device, an all-in-one wireless media device that streams as well as stores media. Key features also call for the ability for multiple show playback off one device and the ability to access media through mobile devices, allowing for the growth of personal multimedia cloud servers.
So far, the Roamio has garnished positive reviews and provides a preview of not only future trends in entertainment subscription, but also how media will be able to be seen anytime, anywhere.
Tom Rogers, TiVo's President and CEO, spoke of the notion of "wherever you go, there you are" in terms of multimedia access. "Now, wherever you roam your TiVo, Roamio is there. In the next room, in the kitchen, in a hotel room across the world, connecting you right to your living room TV recordings so you can get them immediately wherever you are."
TiVo, which is based in San Jose, Calif., has been quietly yet steadily gaining subscribers over the past two years. After seeing its business decline amid competition from DVRs provided by cable and satellite companies, TiVo now partners with many of those companies, including Comcast Corp., to provide a line of premium DVR offerings.
TiVo had 3.4 million subscribers as of April 30, a nearly 75% increase from 2 million two years earlier, along with over $1 billion in current assets (including over $450 million in cash) and has trimmed expenses by 8% this past quarter. TiVo also expects that MSO agreements will drive sequential increases in both service revenue and technology revenue and that for fiscal 2014, TiVo reiterated profitability guidance even with current litigation spending, according to regulatory filings.
TiVo also stands to benefit from huge growth in MSO revenue, increasing 98% years over year, along with 13% year over year growth in technology and service revenue and announced that the trend, according to CEO Rogers, will be in the cloud. "Looking ahead, we're continuing to focus on our vision of making consumption of television more personalized, with more programming choices customized according to user-defined preferences and accessible from the cloud enabling users to get those programming choices through TiVo on different devices regardless of location."
Long term, we believe that TiVo has the potential for a significant move to the upside in the $18-$22 range. Especially if the company can show that there is healthy demand for the Roamio and further MSO growth, TiVo should garnish further coverage as developments unfold. We will post special updates as events unfold.
Taser Expands Mobile Camera Suite
Taser International, traditionally known as the maker of non-lethal conducted energy weapons (CEW) has shocked the market by providing new and exciting law-enforcement tools, such as the AXON line of on-officer cameras, which record and store activity footage but also offers the services of EVIDENCE.COM, an online platform for video storage, evidence management and evidence storage and transfer, signaling the transition from a device maker to a law enforcement systems contractor.
Recently the company has benefited from recent court rulings regarding evidence submission and for reports of police misconduct and brutality, such as the court ruling in New York City recently that questioned the premise of a police officer stopping and searching someone for drugs or weapons. Contrary to initial assessments, not only has the Taser AXON wearable camera has proven to be quite effective in producing evidence to be used in legal proceedings, but to also provide evidence in complaints of unnecessary force against police officers. Sales of AXON devices have been strong as well. To supplement these positive indicators, some New York City police officers to wear these cameras while on duty as part of a pilot program for the largest police force in the U.S.
Ironically enough, tasers themselves are illegal in New York City.
While for the past decade revenues and earnings were inconsistent, the opportunities that both Axon and Evidence.com offer allows Taser to take advantage of not only their CEW line but also two fast digitalization trends in law enforcement, important drivers to Taser's revenue. Taser's balance sheet shows no long-term debt and around $20 million in cash.
Taser's sales have grown at approximately 13% annually over the past decade. Nonetheless, over that same period, Taser has not been able to steadily profit. However with the advent of the AXON Devices and its jump into being a service provider, Taser has not only seen increases in net sales but increases in operating cash flows and operating income as well, along with the benefit of exiting a heavy R&D cycle, which means more products and profits over the next few years.
Especially if Taser's new technology is adopted and starts to take off in larger key markets, expect the stock to continue to do well and trade anywhere from $18-$22, given that the company is starting to make its shift away from singular products and into a more expanded role.
New CEO "Shacks" Up
New Radio Shack CEO Joseph "Joe" Magnacca is hitting the ground running, so to speak. Recently in July, he brought in restructuring expert and interim CFO Holly Etlin from AlixPartners and investment banking firm Peter J. Solomon for a new round of financing and the refinancing of existing debt with its creditors.
The company announced that they had liquid assets of $818 million as of June 30, 2013.
This is just the tip of the iceberg regarding major changes that Magnacca is looking to implement. Facing stiff competition from the likes of Amazon (AMZN) and Best Buy (BBY), changes such as the opening of a select number of retail locations as "concept stores" filled with interactive features and experiences that engage customers in high traffic and high profile locations as part of the company's emphasis on rejuvenating its retail chain.
Also recent developments make it clear that Magnacca and Etlin are focusing on a package of initiatives to improve the top and bottom lines such as the debt financing and concept stores and other potential restructuring solutions such as reducing headcount and through the diversification of its product and service line and through the sale of subsidiaries.
Magnacca stated during an earnings announcement that part of his strategy has started to come together, particularly in sales growth in its retail locations:
"While the second quarter presented a number of challenges, it is noteworthy that we generated comparable store sales growth for the first time since 2010, and increased sales for the sixth consecutive quarter in our high-margin signature platform of products. In addition, we made progress on the initiatives we outlined last quarter in repositioning our branding, opening a new concept store, streamlining our product assortment, and entering new strategic partnerships."
"We will be guided by the five pillars of our turnaround strategy - repositioning the brand, revamping our product assortment, reinvigorating our stores, operational efficiency and financial flexibility," Magnacca went on to add.
With the turnaround strategy getting underway and the company's claim that it may all take several quarters to see meaningful results, the implementation of the strategy does open up the possibility that Radio Shack may go private at some point in the future, but not before the stock does go up to $4.50-$6 before coming back down, especially if meaningful improvements do result from the restructuring strategy.
Emergence of Eastman Kodak from Bankruptcy
One interesting story that is unfolding is the emergence of former photography icon Eastman Kodak (current ticker symbol EKDKQ.PK; could potentially change) from Chapter 11 bankruptcy. Eastman Kodak filed for bankruptcy protection in January 2012, bogged down by a quagmire of high pension costs and a delay of years in embracing digital camera technology that proved to be fatal to the once-pioneering photography company.
Kodak's chief executive, Antonio M. Perez, said in a statement regarding the new direction of the company, "We look to move on to emerge as a technology leader serving large and growing commercial imaging markets." He said the company would have a leaner imaging and technology services portfolio structure along with a stronger balance sheet.
Kodak has already sold off numerous assets and will now focus mainly on commercial products like high-speed digital printing technology and flexible packaging for consumer goods.
Due to the fire-sale nature of its bankruptcy Kodak failed to obtain significant value for its portfolio of patents, which most experts said was a crucial blunder that ultimately resulted in Kodak selling core businesses and giving itself a chance to survive, much less reinvent itself. But the bankruptcy resolved a major dispute with retirees over pensions, and it has adopted a restructuring plan that, while unfortunately wiping out equity shareholders, should pay secured creditors and second-lien note holders in full.
According to a Kodak press release, Kodak's Plan of Reorganization will become effective upon emergence. The company is expected to finalize the remaining aspects of its reorganization, including its settlement with the Kodak Pension Plan and will emerge from Chapter 11 on September 3rd, potentially with a different ticker symbol that has not yet been revealed.
This will remain on a development that will no doubt be interesting and worthy of press coverage in the coming weeks, especially as details of the restructuring will be revealed and implemented. With the ever strong and growing market for device glass used for devices such as tablets and soon to be used on wearable devices such as Google Glass the same way with Himax (HIMX), there is a strong possibility of Eastman Kodak being a potential M&A target down the road by a larger competitor in the industry.
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