OK, another Stock Pick.
Tivo has to be one of the worst acting and most frustrating Stocks to own anywhere. It’s known to swing up wildy for no reason (other than MM manipulation) and float downward slowly (or not so slowly) after nearly every big up day.
A nice stock to play the swings you might say. Yes, that’s true but Stocky believes that Tivo’s swinging days are coming to an end.
Tivo has several significant upward catalysts ready to hit. They are:
- Comcast Rollout (Friggin finally)
- Comcast likely to make Tivo their standard DVR (if this happens look out shorts)
- Lower priced HD Tivo doing well (sales appear to be better than expected)
- Echostar case coming to an end (or at least the latest end until Dish appeals to the supreme court)
- DTV Relationship improving (look for a new DTV HD Tivo after Liberty deal closes)
- Increasing revenue from StopWatch second by second commercial ratings
- Mexico rollout
- Cox Cable rollout next year
- Huge (20%+) short position
- TivotoGo and Multi-room viewing for S3 + HD owners soon
- Tivo Branded Plugin Hard Drives to expand storage capacity by end of year
- Amazon Unbox Downloads gaining popularity
- Australia Distribution Deal
The huge number of shorts significantly reduces the downside risk. The only way those shorts make their money is by buying back the stock. So in the event of a disaster (like losing the Dish appeal) the plunge in stock price would be muted as the shorts create buying pressure on their way to cash out. It sounds like spin but it’s true. You just have to be willing to get out of the stock at the first notice of a disaster.
On the flip side, good news, like the more likely scenario of winning the Dish case is a delicious short squeeze.
While Stocky would still like Tivo at $6 without a Dish win; short term would be ugly. A Dish win also plays into more deals with others who don’t want to get sued. It’s not inconceivable to imagine that Tivo could be paid a dollar per month for every DVR in use in North America. At least every non-crappy DVR.
That’s a 2 - 3 year view though and the revenue gains from StopWatch is also relatively long term.
The Comcast relationship is also key to Tivo’s fortunes. Comcast recently agreed to fund development of the Tivo/Comcast software to run on their Scientific Atlanta set top boxes. That will give Comcast the ability to offer the Tivo DVR to all of their customers. Stocky will predict that Comcast will dump their crappy DVR and make Tivo their standard DVR. That may not happen for a while but it will.
As soon as the DTV/Liberty deal closes (by the end of this year) DTV wil have no reason to continue with Ruper Murdochs crappy NDS DVR. In fact, Tivo CEO Tom Rogers has already commented on the “Improved relations” between Tivo + DTV and Tivo announced that they will be providing updates to the millions of Tivo DTV boxes still in use. Why do that unless you plan to do a longer term deal with DTV?
In addition to Comcast + DTV, in the shorter term you have Amazon Unbox going gangbusters with the ability to order downloads from your couch and the long awaited implementation of TivotoGo and MRV for S3 + HD owners. There are thousands of Tivo Geeks that have been waiting for these features before plunking down the money for an additional Tivo. Tivo HD has been showing very strong in the Amazon top electronic products sold list since it was launched and it should do even better for the holiday season. Who is going to spend 2-3 grand on a new HD TV and not want to drop a mere $300 for a Tivo?
Another massive oppurtunity to sell into the existing Tivo customer base is the addition of a Tivo Branded external hard drive to increase storage capacity. The Tivo Uber-Geeks have been adding drives on their own for months and as usual Tivo has stumbled in the execution of this but in the end nearly every S3 + HD Tivo owner will purchase more storage via the Tivo drive. Tivo BETTER get some great margins out of this product.
So, let’s review. By the end of next year Tivo could have locked up DVR’s for DTV, Comcast + Cox. The 2 biggest cable providers and 1 of the 2 Sat providers. The other Sat provider, Dish is worthy of a future post of it’s own.
Add the stand alone Tivo customers (analog + HD) and you have a bunch of subscribers.
The better to use when selling StopWatch services.
It’s a good business plan finally coming together in spite of Tivo management. As I said at the beginning of this post, Tivo has been a frustrating stock to own.
One wonders why a company with the most and best data in history on the second by second viewing habits of highly desirable (affluent) Americans at their fingertips cannot execute a marketing campaign to save their life.
Christ Almighty what dopes.
However, in the end, Stocky believes the subscriber numbers will overcome all.
$20 is not out of the question.
