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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:
 

  1. The mean analysts' price target of the 12 analysts that cover the stock is just $15 a share, implying more than 45% upside.
  2. 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.
  3. 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.
  4. The stock recently bounced off a long term technical support range and just crossed its 200 day moving average (See Chart)

(click to enlarge)

Source: TiVo Is Worth A Replay At $10 A Share