TiVo (TIVO) creates licensable technology that enable the world’s leading media and entertainment providers to nurture more meaningful relationships with their audiences, notes Crista Huff, editor of Cabot Undervalued Growth Stocks Advisor.
TIVO is an undervalued growth stock with a very attractive dividend yield, currently 5.7%. The stock joined our Buy Low Opportunities model portfolio specifically because it’s a takeover target. News of buyout talks initially emerged in December 2017 when the share price was about $13.5.
Management is in strategic discussions with entities that are considering buying TiVo’s product and/or IP licensing divisions. As of early August 2018, management has conveyed that the negotiating process is well under way.
As investors wonder how high the share price could go, keep in mind that management considered $13.5 to be a grossly low price — enough so that they are willing to entertain buyout offers so that shareholders receive a more appropriate price for the stock.
In fact, management put their CEO search on hold, since the company will likely be under new management by a potential buyer. Investors should expect a final M&A announcement any time between now and year end.
Meanwhile, news emerged on August 17 that Amazon (AMZN) is developing a product that competes with a TiVo product. I appreciate that investors might worry that Amazon could disrupt a few of TiVo’s client relationships.
Consider the upside, though. If Amazon deems a TiVo-type product to be a potentially integral part of their media technology, then odds are good that other media companies will also value such products.
In that light, any large media company might want to buy TiVo — the whole company — rather than “reinvent the wheel” by trying to duplicate TiVo's technology. This news reinforces the premise that TiVo’s technological advances are desirable to competitors.
With valuable patents, constant innovation in entertainment technology, and a tiny $1.5 billion market cap, TiVo is an easy and obvious takeover target for any number of media conglomerates that want to “own instead of rent” the technology that’s essential to their products and services. I rate the stock a strong buy.
