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TiVo Corp. (TIVO) Faces Stiff Competition: Should You Dump?
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Do you still have shares of TiVo Corporation in your portfolio? If yes, then this is the best time to dump the stock as chances of favorable returns in the near term are slim.
In fact, the stock has gained just 9% in the past one year, underperforming the Zacks categorized Internet Services industry, which has witnessed a gain of 15.4%. Let’s delve deeper and try to find out what is taking this Zacks Rank #5 (Strong Sell) company down.
Growth Impediments
Intense competition is eroding TiVo’s subscriber base. The company faces increasing competition from cable and satellite providers, who offer bundled up DVR service with digital cable in one set-top box at comparable monthly subscription rates and without any upfront costs. It faces significant competition from a number of companies, which have created competing DVR technologies and offer attractive licensing agreements to service providers and manufacturers of DVRs, thereby leaving little to no scope for differentiation. The company is also facing significant competition from Alphabet Inc. (GOOGL - Free Report) TV, Roku and Apple (AAPL - Free Report) TV.
The current challenging economic environment and intense competition in the DVR business have made operations more difficult. As a result, TiVo has been increasing its research and development (R&D) spending to stay ahead of the competition, which will continue to hurt its profitability, going forward.
The merger of TiVo and Rovi Corp. has brought together two leading players in the media entertainment industry with complementary products and services as well as a number of patented technologies. The new TiVo Corporation has now become the global leader in entertainment technology and audience insights. However, the actual synergies from the merger will take some time to reflect on the company’s performance and much depends on the successful integration of TiVo’s legacy business.
Estimates Moving South
Estimates for fiscal 2016 and fiscal 2017 have moved south in the past 30 days. The company’s fiscal 2016 earnings estimates moved down by 43 cents to $1.23 per share. Similarly for fiscal 2017, earnings estimates moved down by 65 cents to $1.39 per share. Given its weak fundamentals and an unfavorable Zacks Rank, it is likely to keep underperforming in the quarters ahead.
Low Return
Given the other unattractive features like low return on equity (ROE) and low return on assets (ROA), the stock looks very unappealing. TiVo currently trades at a ROE of 13.6%, much lower than the industry average of 23.6%. Notably, the company has an ROA of 6.7% compared with the industry average of 11.2%. Return on capital (ROC) of 7.7% is also lower than the industry average of 16.2%.
Last Word
The stock has Zacks Style Score of "D" in Momentum, "D" in Value and "C" in Growth. The stock has a VGM Style Score of "C".. So, if a stock you’re in slips to Style Score of D, C or F, it’s better to sell that stock and switch to a new one with a Style Score of A or B.
We expect the aforementioned factors to hurt the company’s near-term profitability. Hence, we recommend investors to stay away from TiVo shares until its Zacks Rank, VGM score and estimates improve.
Seagate has long-term expected earnings per share growth rate of 8.79%.
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TiVo Corp. (TIVO) Faces Stiff Competition: Should You Dump?
Do you still have shares of TiVo Corporation in your portfolio? If yes, then this is the best time to dump the stock as chances of favorable returns in the near term are slim.
In fact, the stock has gained just 9% in the past one year, underperforming the Zacks categorized Internet Services industry, which has witnessed a gain of 15.4%. Let’s delve deeper and try to find out what is taking this Zacks Rank #5 (Strong Sell) company down.
Growth Impediments
Intense competition is eroding TiVo’s subscriber base. The company faces increasing competition from cable and satellite providers, who offer bundled up DVR service with digital cable in one set-top box at comparable monthly subscription rates and without any upfront costs. It faces significant competition from a number of companies, which have created competing DVR technologies and offer attractive licensing agreements to service providers and manufacturers of DVRs, thereby leaving little to no scope for differentiation. The company is also facing significant competition from Alphabet Inc. (GOOGL - Free Report) TV, Roku and Apple (AAPL - Free Report) TV.
The current challenging economic environment and intense competition in the DVR business have made operations more difficult. As a result, TiVo has been increasing its research and development (R&D) spending to stay ahead of the competition, which will continue to hurt its profitability, going forward.
The merger of TiVo and Rovi Corp. has brought together two leading players in the media entertainment industry with complementary products and services as well as a number of patented technologies. The new TiVo Corporation has now become the global leader in entertainment technology and audience insights. However, the actual synergies from the merger will take some time to reflect on the company’s performance and much depends on the successful integration of TiVo’s legacy business.
Estimates Moving South
Estimates for fiscal 2016 and fiscal 2017 have moved south in the past 30 days. The company’s fiscal 2016 earnings estimates moved down by 43 cents to $1.23 per share. Similarly for fiscal 2017, earnings estimates moved down by 65 cents to $1.39 per share. Given its weak fundamentals and an unfavorable Zacks Rank, it is likely to keep underperforming in the quarters ahead.
Low Return
Given the other unattractive features like low return on equity (ROE) and low return on assets (ROA), the stock looks very unappealing. TiVo currently trades at a ROE of 13.6%, much lower than the industry average of 23.6%. Notably, the company has an ROA of 6.7% compared with the industry average of 11.2%. Return on capital (ROC) of 7.7% is also lower than the industry average of 16.2%.
Last Word
The stock has Zacks Style Score of "D" in Momentum, "D" in Value and "C" in Growth. The stock has a VGM Style Score of "C".. So, if a stock you’re in slips to Style Score of D, C or F, it’s better to sell that stock and switch to a new one with a Style Score of A or B.
We expect the aforementioned factors to hurt the company’s near-term profitability. Hence, we recommend investors to stay away from TiVo shares until its Zacks Rank, VGM score and estimates improve.
Stock to Consider
A better-ranked stock in the technology sector is Seagate Technology plc (STX - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Seagate has long-term expected earnings per share growth rate of 8.79%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>