TiVo, Napster lead busy August; news not so good for Imax
Imax lags in August
SepT 2, 2006
The Nasdaq rallied in August, a traditionally sleepy month on Wall Street, and the stocks of many new-media firms led the way. One notable exception: Imax Corp.
The purveyor of movies on giant screens -- increasingly by way of 3-D technology -- is a hit with audiences, though investors are probably less enthused after watching the stock take a 57.8% dive last month.
Imax has been for sale, though the company said early last month -- when its shares traded for slightly less than $10 -- that prospective buyers weren't bidding very high. The news was met with a flurry of downgrades, and the stock finished the month at $4.56.
"We believe the sharp reduction in Imax's stock price could still lead to the consummation of a transaction, albeit at a significantly reduced valuation to our (and the board's) original expectations," Susquehanna Financial Group analyst Michael Kelman wrote in downgrading the stock to "neutral."
At the other end of the scale was TiVo Inc., which surged 22.6% during the month, making it the No. 1 performing stock on The Hollywood Reporter/Bloomberg 50 Entertainment Stock Index.
The company hit a triple last month, racking up more legal victories in its patent-infringement lawsuit against EchoStar Communications Corp.; sealing a marketing deal with Cox Communications; and reporting quarterly financial results that were better than the Street expected.
TiVo also deepened its relationship with advertising powerhouse Omnicom Group, which, coupled with a previous deal with Interpublic Media, has some analysts bullish on TiVo's interactive advertising prospects even though the stock didn't react to the Omnicom news.
"We view advertising revenue as a key future driver of growth at TiVo," said BMO Capital Markets analyst Leland Westerfield, who has a $13 price target on the firm's shares. They closed the month at $8.25.
The biggest catalyst for TiVo shares might still be on the horizon, many on Wall Street argue. While a judge hit EchoStar with an injunction, barring the company from selling DVRs and demanding that it disable about 4 million it already has deployed because they infringe on TiVo patents, another judge issued a temporary stay of that injunction.
If the stay is made to last throughout EchoStar's appeal of an $89.6 million judgment against it, TiVo shares should head south. If the stay is lifted, they'll probably go north.
"The momentum around the patent infringement lawsuit against EchoStar is likely to subside if a longer term stay of the injunction against EchoStar is granted, which we believe is more likely to occur than not," said Kelman, who rates TiVo shares "negative."
Kelman and others speculate that, barring a lifting of the stay of injunction or the striking of a deal between EchoStar and TiVo that would end litigation, the appeals process would last as long as two years, putting a cloud over shares of TiVo though not over EchoStar, which is about 20 times larger than TiVo when measured by market capitalization.
Also performing well in August were shares of Napster Inc., up 23.5% to $3.36. In May, Napster launched its ad-supported Napster.com site, allowing visitors to listen to tracks multiple times for free while, in theory, being lured to its paid subscription service.
Another bullish development had Nokia Corp. paying $60 million for business-to-business digital music company Loudeye Corp. The price tag of $4.50 per Loudeye share was a more than 150% premium to where shares were trading, and some analysts speculated Napster might also attract a buyer.
RealNetworks, which competes with Napster by way of its subscription music service Rhapsody, also saw action. Its shares ended the month 10.3% higher at $11.03.
Electronic Arts Inc. scored an 8.3% rise in August to $51.03 as investors look toward a robust Christmas for video games and an end to uncertainty surrounding the hardware upgrade cycle. Not only that, EA's "Madden NFL '07" game also set sales records during its first week at stores.
Finally, shares in XM Satellite Radio, a serial underperformer this year, rose 11.6% to $12.95 last month, mostly on news that the FCC has determined that several previously suspect XM radios do not interfere with traditional radio signals. Investors had worried that such a proclamation might not come until after the holiday gift-giving season.
The purveyor of movies on giant screens -- increasingly by way of 3-D technology -- is a hit with audiences, though investors are probably less enthused after watching the stock take a 57.8% dive last month.
Imax has been for sale, though the company said early last month -- when its shares traded for slightly less than $10 -- that prospective buyers weren't bidding very high. The news was met with a flurry of downgrades, and the stock finished the month at $4.56.
"We believe the sharp reduction in Imax's stock price could still lead to the consummation of a transaction, albeit at a significantly reduced valuation to our (and the board's) original expectations," Susquehanna Financial Group analyst Michael Kelman wrote in downgrading the stock to "neutral."
At the other end of the scale was TiVo Inc., which surged 22.6% during the month, making it the No. 1 performing stock on The Hollywood Reporter/Bloomberg 50 Entertainment Stock Index.
The company hit a triple last month, racking up more legal victories in its patent-infringement lawsuit against EchoStar Communications Corp.; sealing a marketing deal with Cox Communications; and reporting quarterly financial results that were better than the Street expected.
TiVo also deepened its relationship with advertising powerhouse Omnicom Group, which, coupled with a previous deal with Interpublic Media, has some analysts bullish on TiVo's interactive advertising prospects even though the stock didn't react to the Omnicom news.
"We view advertising revenue as a key future driver of growth at TiVo," said BMO Capital Markets analyst Leland Westerfield, who has a $13 price target on the firm's shares. They closed the month at $8.25.
The biggest catalyst for TiVo shares might still be on the horizon, many on Wall Street argue. While a judge hit EchoStar with an injunction, barring the company from selling DVRs and demanding that it disable about 4 million it already has deployed because they infringe on TiVo patents, another judge issued a temporary stay of that injunction.
If the stay is made to last throughout EchoStar's appeal of an $89.6 million judgment against it, TiVo shares should head south. If the stay is lifted, they'll probably go north.
"The momentum around the patent infringement lawsuit against EchoStar is likely to subside if a longer term stay of the injunction against EchoStar is granted, which we believe is more likely to occur than not," said Kelman, who rates TiVo shares "negative."
Kelman and others speculate that, barring a lifting of the stay of injunction or the striking of a deal between EchoStar and TiVo that would end litigation, the appeals process would last as long as two years, putting a cloud over shares of TiVo though not over EchoStar, which is about 20 times larger than TiVo when measured by market capitalization.
Also performing well in August were shares of Napster Inc., up 23.5% to $3.36. In May, Napster launched its ad-supported Napster.com site, allowing visitors to listen to tracks multiple times for free while, in theory, being lured to its paid subscription service.
Another bullish development had Nokia Corp. paying $60 million for business-to-business digital music company Loudeye Corp. The price tag of $4.50 per Loudeye share was a more than 150% premium to where shares were trading, and some analysts speculated Napster might also attract a buyer.
RealNetworks, which competes with Napster by way of its subscription music service Rhapsody, also saw action. Its shares ended the month 10.3% higher at $11.03.
Electronic Arts Inc. scored an 8.3% rise in August to $51.03 as investors look toward a robust Christmas for video games and an end to uncertainty surrounding the hardware upgrade cycle. Not only that, EA's "Madden NFL '07" game also set sales records during its first week at stores.
Finally, shares in XM Satellite Radio, a serial underperformer this year, rose 11.6% to $12.95 last month, mostly on news that the FCC has determined that several previously suspect XM radios do not interfere with traditional radio signals. Investors had worried that such a proclamation might not come until after the holiday gift-giving season.
Share on LinkedIn
