DivX has a strong position in the digital video market, a growing number of partnerships including latest CBC and Samsung partnership, increasing demand of DivX software within the consumer electronics device market including Zoran (NASDAQ:ZRAN), and an expanding licensing business as they continue to license to other video content sites and cell phone makers. Their strong branding and open source business model will help drive growth into the 'digital revolution.'
The stock has been getting crushed ever since it reached its peak at $31.89; investors have been weary of lockup expiration which occurred earlier this week, however the long term perspective for the DivX company continues to widely outperform the market. As panic selling and skepticism seem to have bottomed out, we should see increasing buy interest from current levels.
DivX revenues for 2006 was $59.33M, 79% higher yoy. Cash flow turned positive in 2005, growing to $0.61 for 2006. Earnings estimates for FY2007 are conservative, $0.03 below earnings for 2006. DivX is currently trading at a discount of 33.45 times earnings, compared to as high as 52 times earnings towards the end of 2006. As we continue to get a better perspective on the current quarter, there is more optimism of an earnings beat. Long term growth perspective continues to outperform the market as broker average is at 50%, compared to 4.7% for the software & programming industry, 4.5% for the technology industry, and 3.9% for the S&P 500.
Disclosure: Author has a long position in DIVX
DIVX 6-mo chart