| Stock (Symbol) |
Stock Price |
Rovi (ROVI)
|
$42
|
| Data is as of |
Expected to Report |
Sector |
August 11, 2010
|
Nov 1
|
Technology
|
| Company Description |
|
Rovi Corp, formerly Macrovision Solutions Corporation, provides a set of solutions that are embedded in its customers’ products and services and used by end consumers. The Company’s offerings include interactive program guides (IPGs); embedded licensing technologies (such as recommendations and search capability), standards based media connectivity middleware, media recognition technologies, licensing of its database of descriptive information about television (TV), movie, music, books, and game content, and content protection technologies and services. The Company sells its products into the market verticals, such as service providers (cable, satellite, telecommunications, mobile and Internet service providers), consumer electronics (CE) manufacturers and others. In January 2009, the Company sold its TVG Network business and, in February 2009, it sold TV Guide Network and TV Guide Online businesses.
|
| Sharek’s Take |
 Rovi makes the electronic menu guides on your TV, cable box and DVD player. The company earns recurring revenue of around $0.25 per cable subscriber per month and around $8 up front for every DVD player sold with its guides.Rovi just announced a state-of-the-art guide called Total Guide (TG). TG controls your cable TV, DVR, internet-based content as well as movies, music and photos on your home computers. Total Guide has on-screen ads which bring in revenue too. Total Guide could be HUGE with one analyst (Ralph Schackart, William Blair) suggesting ROVI could make $4.32 to $7.14 in 2013 (note current estimates stand at $2.06). This could be big. GoogleTV also inked a deal with Rovi this year, but details aren’t known. |
| One-Year Chart |
| The one-year chart shows a stock that’s been going up nicely. ROVI broke out when it announced last quarters earnings — and I then bought the stock. A P/E of 20 isn’t a high price for one of the current technology leaders. There’s a chance ROVI’s profit growth could be big in the next few years, but even if that doesn’t happen I still like this investment. |
 |
| Profit Growth |
Earnings Table |
| ROVI’s profits have been growing 45-56% during the past three quarters. Revenue rose 13% last quarter. From the looks of estimates, ROVI seems to be a teens grower on the revenue side. 11% sales growth is expected this year, 13% next year. Revenue growth needs to pick up if ROVI is going to be a top-tier stock. |
 |
| Beat the Street |
| ROVI beat the street by 8 cents last quarter and investors were so pleased the stock broke out to a 52-week high. This company has a good history of beating estimates during the last year, but I can’t say we can trust ROVI’s certainty because I haven’t followed the company very long. I track a lot of growth stocks for years at a time. |
| Annual Profit Estimates |
| Annual Profit Estimates increased just a little. ROVI beat by 8 cents last quarter but 2010 estimates only increased by 7 cents. I thought the increase for the year would be greater. |
| Future Quarters |
| Also, estimates foe the next few quarters did not go up as I had hoped. I’m not as bullish on this stock as I was when I bought it last month — earnings estimates didn’t increase as much as I thought they would. |
| Fair Value |
| ROVI seems to be worth 25 times earnings. Profit growth is expected to be a solid 36% this year. I’d like to think ROVI is worth 30 times earnings, but estimates show slowing growth ahead unless the company can do better by then. |
| Year |
Profits |
x |
P/E |
= |
Price |
Upside/Downside |
| Today |
$2.06 |
x |
20 |
= |
$42 |
|
| 2010 Fair Value |
2.06 |
x |
25 |
= |
52 |
24% |
| 2011 Fair Value |
2.45 |
x |
25 |
= |
61 |
45% |
|
| Ten-Year Chart |
| Rovi used to be named Macrovision (MVSN). Macrovision IPO’s in 1997 and changed its name in 2009. The ten-year chart shows Macrovision crashed during 2000 like many tech stocks did. I remember MVSN but Inever really tracked it or knew what the company did.I think the new Total Guide and technological advances in menu guides puts ROVI into a new growth phase. Still, you have to look at the ten-year Annual EPS Growth and think there’s not a lot of consistency in growing profits. |
 |
| Power Ranking |
Bottom Line |
Growth Portfolio
11 of 18
|
The big question mark on ROVI is how much will the company earn in coming years and what kind of P/E do you put on the stock. Either way I like this stock right now at 20 times earnings, that is a good price to pay for a stock with unknown potential.Rovi is the 11th best stock to own in the the 18 stock Growth Portfolio. Profits are growing strong and I love the growth opportunity of digital menu guides. This could be big.
ROVI isn’t good enough for the Aggressive Growth Portfolio. |
Aggressive Growth Portfolio
N/A
|
