Is TiVo Undervalued?

With shares of TiVo (NASDAQ:TIVO) trading around $10, is TIVO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

TiVo is a developer and provider of software and technology that enables the search, navigation, and access of content across sources, including linear television, on-demand television, and broadband video. The company provides these capabilities through set-top boxes that include DVRs or non-DVR set-top boxes, tablet computers, mobile phones, and other screens. It also provides advertising solutions for the media industry, including a platform for interactive advertising and audience measurement services. Consumers are engaging with media technology at an increasing rate so as long as TiVo continues to improve, rising prices should be in sight. However, a recent settlement has not produced positive vibes among investors in the company.

T = Technicals on the Stock Chart are Mixed

TiVo stock has been chugging higher, albeit with some volatility, over the last several years. The stock was making positive progress but is now seeing a good amount of selling pressure. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, TiVo is trading below its key averages which signal neutral to bearish price action in the near-term.

TIVO

(Source: Thinkorswim)

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Taking a look at the implied volatility (red) and implied volatility skew levels of TiVo options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

TiVo Options

42.49%

0%

0%

What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Steep

Average

August Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on TiVo’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for TiVo look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

47.06%

-351.82%

309.52%

-35.29%

Revenue Growth (Y-O-Y)

21.84%

33.68%

26.64%

6.66%

Earnings Reaction

2.05%

-0.08%

6.35%

-3.41%

TiVo has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been a bit confused about TiVo’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

How has TiVo stock done relative to its peers, AT&T (NYSE:T), Sony (NYSE:SNE), Microsoft (NASDAQ:MSFT), and sector?

TiVo

AT&T

Sony

Microsoft

Sector

Year-to-Date Return

-12.51%

6.23%

82.14%

30.89%

11.56%

TiVo has been a poor relative performer, year-to-date.

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Conclusion

TiVo is a provider of media content management that serves many busy consumers who need to schedule entertainment at their own time. The stock has been moving higher, with some volatility, and is now seeing some selling due to a recent settlement. Over the last four quarters, earnings have been mixed while revenues have been on the rise, confusing investors in the company. Relative to its peers and sector, TiVo has been a poor performer year-to-date. WAIT AND SEE what TiVo does in coming quarters.

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