Digital video recorder maker TiVo (TIVO, Financial) announced solid results for the second quarter that exceeded consensus estimates. TiVo experienced tremendous growth of 33% to 4.8 million in its subscriber worldwide with the support of cable TV associates. In addition, the company is strengthening its relationship with Comcast that will enhance its CableCARDS and help the company installing Non-CableCARDS solutions going forward.
The company reported revenue growth of about 12% to $111.9 million from $100.09 million recorded in the same quarter last year, beating the analysts’ estimates of $87.7 million in revenue for the second-quarter fiscal 2015. Its net earnings of $0.08 per share also topped the average analyst’s expectation of $0.07 earnings per share for the quarter.
How the road ahead looks
Looking ahead, the company looks solid on multiple grounds such as strong buyback programs, healthy outlook and potential acquisition. TiVo plans to repurchase shares worth of $100 million this year and remains committed to buy approximately $250 million by the end of fiscal 2017. The company meanwhile unveiled a healthy outlook for the third quarter with its service and technology revenue to be in the range of $86 million to $89 million and net profit is estimated to range between $6.0 million and $9.0 million.
The high end of its net earnings is in line with consensus estimates of $9.0 million for the third quarter fiscal 2015. TiVo has strong pipeline of acquisitions or deals such as Cogeco and EnTouch, Comcast and DirecTV. Moreover, the company is planning to build relationship with many other cable TV operators that will certainly drive growth for its business in the future.
The recent partnership with Cogeco, a Canadian telecom company is expected to reinforce its operator distribution reach and leverage its multiple-system operator or (MSO) profile. Cogeco renders its telecom service to approximately 800,000 telecom customers across Canada and has more than 200,000 television customers in United States for its subsidiary Atlantic Broadband. Besides, Cogeco has selected TiVo’s world-class television solutions such as Netflix to deploy for its subsidiary Atlantic Broadband’s television customers in the United States.
This television solution has additionally been recognized by Cablefax magazines in the United States as the successful launch of Netflix via TiVo as the MSO Technology for the Year.
More deals
In addition, the company has also signed a deal with EnTouch located in Houston to deploy its television solution to tier 2 cities in the domestic market in the United States. TiVo sees remarkable market opportunity in the domestic market and remains on track to crack the half of the total domestic market opportunity with its leading technological solutions going forward. TiVo has only 5% market share at present for domestic market or tier 2 households in the United States.
Also, the company has started gaining traction in the Swedish market with its existing partner Com Hem that has observed 17% market penetration for TiVo television’s solution in just nine months and Com Hem expects TiVo’s TV solutions to be integrated with its OTT services and on-demand products thus creating it the only one stop shop for video entertainment in Sweden, should assist TiVo as well in improving its margins and sales in the second half of the year.
Furthermore, TiVo is experiencing relatively strong demand for its set top boxes from Cable TV customers across the country as these set top boxes facilitate the customer with greater content with online videos services like Hulu, Netflix Inc's (NFLX, Financial) Netflix and Google Inc's (GOOG, Financial) YouTube . Besides, TiVo continues to provide better integration for the operators like DirecTV (DTV, Financial) with enhanced television content from all sources upgrading its legacy video or next generation video to TV solutions such as Netflix.
The company has built strong relationships with cable TV operations like includes Atlantic Broadband, Cable One, Grande Communications, Suddenlink Communications and RCN, Midcontinent Communications, and GCI in addition to European operators Virgin and Com Hem.
Apart from this TiVo’s owned offerings are now picking up the pace as the company is now offering a more customized and personalized solutions that are configured based on the user preferences and accessible from the cloud on any devices from any location. TiVo is also engaged in developing innovative solutions such as Haxe, and multi-platform programming language that will certainly enhance the performance of its Premier Boxes going forward.
In addition, the company is also committed to build strong data capabilities that will provide superior services to advertisers with their unique preferences to generate enhances sales online. TiVo has recently built relationship with Datalogix that is supposed to assist online digital advertisers to effectively evaluate the offline sales measuring the TRA user Datalogix’s capabilities that will certainly encourage its television purchase data.
Conclusion
TiVo is currently trading at the trailing P/E multiple of 6.72. Looking at its potential, the stock will soon pick the pace. Moreover, the analysts have estimated CAGR of 11.10% for the next five years with 51.90% growth in the next years indicate a lot of growth for the stock in future. Hence investors can certainly consider buying more of the stock as it is relatively cheap now.
