Should TiVo’s Stock Still Turn You On?

With shares of TiVo (NASDAQ:TIVO) trading at around $12.10 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:

C = Catalyst for the Stock’s Movement

Results for Q3 were good, but did you read between the lines? A $78.4 million portion of a $250 settlement from Verizon (NYSE:VZ) helped a great deal. This is after TiVo received a $500 million settlement from Dish Network (NASDAQ:DISH) last year. So, we’re not exactly talking about organic growth here. TiVo is currently relying on patents as leverage with cable and satellite companies. That’s great for the near term, but what’s the long-term game plan? In addition to that, management has projected a loss for Q4.

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

Analysts seem to love this stock. 14 analysts have given a Buy recommendation, one has given a Hold recommendation, and there are no Sell recommendations. On the other hand, there are many people who don’t agree with the analysts. These are the shorts. The short percentage of the float is 15.50%, which is very high.

This isn’t enough information to determine whether or not TiVo is a good investment right now. Let’s take a look at some other numbers.

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for TiVo is normal. Actually, it’s much stronger than other companies in the industry. The balance sheet also looks very healthy.

Debt-To-Equity

Cash

Long-Term Debt

TIVO

.51

$623.55 Million

$172.50 Million

TWC

3.56

$3.85 Billion

$27.06 Billion

VMED

11.91

$190 Million

$9.49 Billion

 

T = Technicals on the Stock Chart Are Strong

TiVo has performed well over the past three years. For a long time this was a single-digit stock with promise. It’s now trading for over $11. Just keep in mind that this stock has traded over $10 numerous times over the past few years, and it has dropped back below $10 every time.

1 Month

Year-To-Date

1 Year

3 Year

TIVO

11.70%

28.76%

14.93%

14.81%

TWC

3.36%

52.61%

54.71%

141%

VMED

9.76%

66.46%

60.45%

116.3%

 

At $11.56, TiVo is currently trading moderately higher than its 50-day SMA of $10.30 It’s trading significantly higher than its 100-day SMA of $9.66. It’s also trading significantly higher than its 200-day SMA of $9.88.

 E = Earnings and Revenue Are Consistent

Annual revenue always tells a story. When facts and trends are coming from all different directions and you just want to know the bottom line in regards to progress, look at annual revenue. In this case, annual revenue tells the story of a company that might have already peaked. Simply look at 2008 vs. 2012. There should be progress through those years, but that’s not the case.

2008

2009

2010

2011

2012

Revenue ($)in millions

272.68

250.19

238.47

219.61

238.18

Diluted EPS ($)

-.32

1.01

-.22

-.74

.80

 

Excluding the last quarter in which a settlement played a role, revenue and earnings leave a lot to be desired.

10/2011

1/2012

4/2012

7/2012

10/2012

Revenue ($)in millions

64.77

66.47

67.77

65.26

82.03

Diluted EPS ($)

-.21

.14

-.17

-.23

.44

 

T = Trends Support the Industry, But Not the Company

There are many long-term threats to TiVo. The biggest threat is online. While sometimes on the grey side of the law, there are ways to watch whatever TV shows you want online. With more people using mobile devices and having easier access to the Internet in general, this could steal market share away from TiVo.

Conclusion

This is one of those stories where the balance sheet is strong and the company is managed well, but there is a tremendous lack of innovation. Great technology never succeeds unless it continues to change with the times. That is possible here, especially with the amount of cash available, but TiVo doesn’t seem to have a sense of urgency in that regard.

Considering there is potential for innovation and the balance sheet is strong, and considering the stock always falls back below $10, TiVo is a WAIT AND SEE.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.