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leaderoftheback (42.98)

Why I'm buying more TIVO



October 16, 2013 – Comments (2) | RELATED TICKERS: TIVO , NFLX

Talk about your unloved stock!  Plenty of reasons for that, but if we're to make real money, we can't dwell (too much) on the past.  Look at the present and toward the future.  So here's why:

1. Recurring income: Tivo supposedly undersold itself in the last patent win, but that patent win did add to the growing pile of pennies that come from licensing. 

2. Success elsewhere: success of other companies simply because they have Tivo; top of the heap is Virgin Media.  They are growing against competition because they have Tivo.

3. Speaking of companies growing because of Tivo: how about that little company called "Netflix?"  Little Netflix is getting a boost from big bad Tivo.

4. Valuation: Rangebound for the longest time, and very narrowly at that.  There is little downside risk from here.  Should a leg down happen, it will be because of broader markets, not Tivo fundamentals.  If it happens, I will buy more.

So I ask you this...if Netflix (400+ P/E) is getting a boost from long-unloved Tivo (5+ P/E), what happens if Tivo starts getting a little real love?  And speaking of love, if you've never owned a Tivo, you've never loved TV as much as you could, no matter what species of DVR you have used.  In our house, we have 3 hours of TV per week, which we watch in almost real time in about 2 moronic commercials/political adds.  It makes TV tolerable and we can spend that extra hour actually doing something.

So here's to dreaming of a 400 P/E; that's a share price of about $900, against today's cost of $12.50.  Realistic?  I personally think there is rarely/never a case for a 400 P/E, but anyway, who knows.  But there is a lot of distance in between a 5 P/E and 400 that is very plausible.




2 Comments – Post Your Own

#1) On October 16, 2013 at 1:24 PM, constructive (99.97) wrote:

You're looking at one-time income. Normalized income excluding one-time items is barely positive, it already trades at 56x.

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#2) On October 16, 2013 at 1:28 PM, constructive (99.97) wrote:

It certainly doesn't look rangebound to me, and being rangebound has nothing to do with valuation.

In terms of valuation, you need to look at 3x tangible book, 4.3x sales, 56x normalized income, low normalized ROI and historical ROI.

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