I have never written an article or invested in TiVo (NASDAQ:TIVO). The company always seems to be in the news but never seems to capitalize on its potential. The stock has mostly meandered between $8 and $12 a share over the past five years. However, recent settlements and analyst upgrades make the shares a very interesting play at $10 a share. I could easily see a significant breakout if the momentum continues for the company.
Recent catalysts for TiVo:
- Verizon (NYSE:VZ) has just agreed to give TiVo a $250mm settlement around its patents. The settlement will consist of a $100mm upfront payment with quarterly payments through 2018.
- AT&T (NYSE:T) and Dish Network (NASDAQ:DISH) have also given TiVO hefty patent payoffs. Dish settled for $500mm in 2011 and is making quarterly payments through 2017. AT&T settled for $215mm earlier this year.
- Janney Capital Markets believes the remaining lawsuits could bring in an additional $1B to $2B (the market capitalization of company with latest settlement and subtracting cash is just over $700mm).
- Lazard Capital just upgraded the stock to a "buy" and put a $14 price target on the shares. The analyst firm stated that the agreement with Verizon makes a similar outcome with Motorola Solutions (NYSE:MSI) more likely.
"TiVo Inc. provides technology and services for television solutions, including digital video recorders and connected televisions in the United States and internationally." (Business description from Yahoo Finance)
4 additional reasons to buy TIVO at $10 a share:
- The mean analysts' price target of the 12 analysts that cover the stock is just $15 a share, implying more than 45% upside.
- Even before latest settlement, the company had approximately $375mm in net cash on the books (around 30% of market capitalization). All the settlements are with huge players in the industry, so no credit risk to keep receiving quarterly payments. These settlement have additional incentive payouts as well.
- The stock has one of the tiniest five year projected PEGs (.19) I have seen recently. It is also selling at the bottom of its five year valuation range based on P/CF.
- The stock recently bounced off a long term technical support range and just crossed its 200 day moving average (See Chart)