TiVo keeps shareholders guessing

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Talk about your ups and downs. TiVo shareholders have watched their stock fluctuate 11% in the past six trading days. So far, the bears are coming out on top.

The stock last week took a big hit on a downgrade to "sell" from SMH Capital, then almost fully recovered the next day on an upgrade to "outperform" from Bear Stearns.

But after the sixth day of high-volume trading, TiVo settled in Monday at $6.11, down from $6.29 six trading days earlier.

The problem with TiVo, according to analyst David Miller at SMH, is that the company signs high-profile deals that get priced into the stock as investors wait for the results of the said deals. Then they wait some more.

He refers primarily to TiVo's deal with Comcast whereby the No. 1 cable TV operator will sell the TiVo service by way of a cable card that will turn a generic DVR into a TiVo for a few bucks a month.

"The Comcast service was expected to be available as a consumer option on Comcast's DVR product offering in late 2005, then mid-2006, then late 2006, and now 'spring of 2007,' a full two years after the announcement was issued," the analyst writes in his downgrade note.

"We believe the market is effectively pricing in 15% market share of the Comcast-owned DVR base, and the product is not even available yet," he writes.

But Bear Stearns analyst Kunal Madhukar sees "several near-term catalysts" for TiVo, including the Comcast rollout, presumably to be followed by a similar Cox-TiVo product.

Comcast has several reasons to aggressively market the TiVo service, Madhukar says, because it will be the only cabler offering the real TiVo; it makes the whole VOD service simpler for consumers and therefore more lucrative for Comcast; and TiVo has an advertising platform that will generate money for Comcast.

As for all the delays, Madhukar says that the fact that TiVo has begun an expensive TV advertising campaign that extolls the virtues of it over the generic rivals is evidence that the Comcast rollout is imminent.

And the real value of the Comcast relationship, he says, "will be in helping validate the new software-driven TiVo model that other MSOs can replicate, as well as in increasing the advertising reach."

Madhukar set a $6.50 price target on TiVo shares, though he notes that other MSO deals might be forthcoming and those could send the stock significantly higher.
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