Next Monday, TiVo (NASDAQ: TIVO ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.
TiVo built its reputation on its then-revolutionary set-top digital video recorder boxes, which helped changed the way people watch television. But with the company's technology now built in on many services, how can it continue to grow? Let's take an early look at what's been happening with TiVo over the past quarter and what we're likely to see in its report.
Stats on TiVo
Analyst EPS Estimate
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
How can TiVo keep moving forward this quarter?
Analysts have lowered their expectations of TiVo's earnings in recent months, having widened their estimates for the just-ended quarter by almost a dime per share and cutting fiscal year 2014 and 2015 estimates by similar amounts. That pessimism has held the stock back, with shares down 5% since mid-February.
TiVo's DVR technology became a must-have service that cable, satellite, and telecom providers had to offer their customers in order to stay competitive. Even when outright sales of TiVo boxes started to falter, the company was able to earn licensing fees from those providers. Moreover, when companies haven't ponied up, TiVo has had success with legal actions to enforce its patents. Having earned lucrative settlements with the major wireless telecom providers, TiVo has gone after Google's (NASDAQ: GOOG ) Motorola Mobility and Cisco's (NASDAQ: CSCO ) Scientific American units with patent lawsuits. The Motorola trial is scheduled to start next month while the Scientific American trial is expected next March, and analysts expect that Google and Cisco might have to pay $1 billion or more in combined damages if they lose at trial.
Longer-term, though, the question is where TiVo goes from here. Video streaming represents a huge threat to TiVo. Netflix (NASDAQ: NFLX ) and its streaming competitors have made TV-on-demand not only available but also inexpensive, going beyond the pay-per-view models that cable providers have traditionally used to offer monthly all-you-can-watch subscriptions that make recording unnecessary. Between third-party providers like Netflix and direct-content-delivery options that entertainment and media companies have started putting in place, TiVo may find itself increasingly irrelevant in the streaming world.
TiVo has tried to keep itself relevant, introducing its Mini broadcast box in March that allows users to take recorded material and broadcast it to other TV sets, iPhones, or iPads. But the service works only on wired connections rather than via Wi-Fi, and it excluded the popular Netflix from its available lineup. Although future updates might make the Mini more useful, it's still expensive and doesn't really represent a revolutionary change in its core offering.
In TiVo's quarterly report, watch for updates on the coming litigation with Motorola as well as sales figures for the Mini. The stock is likely to move on any news on the legal front, and with so much at stake, what happens in the courtroom will inevitably move the stock sharply in one direction or the other to a much greater extent than interim earnings.
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