NEW YORK — When it comes to TiVo, Wall Street can’t decide whether to fast-forward or rewind.
Company’s stock spiked Monday and then fell back to earth, while a bevy of market analysts threw around upgrades and downgrades.
When it all settled, TiVo’s stock price had climbed 7%, to $8.65, a 52-week high. But the stock had dropped from a roughly 20% gain earlier in the day.
And for every analyst who had upped the stock’s rating to “buy,” there was another who dropped it to “sell,” citing TiVo’s past, appeals challenges and patent limits.
“I thought we would have seen a lot of excitement for the stock today,” the Carmel Group’s Sean Badding said. “But it didn’t happen.”
Citigroup’s Tony Wible and First Albany’s Richard Baldry upped their target price, with the latter sending it to $18, double the current price.
But the legal win didn’t move other Wall Streeters, as analysts at Kaufman Bros. and Ferris Baker Watts were among those downgrading the stock to “sell.”
On its face, TiVo’s win in a Texas courthouse last week changes the game. It gives leverage to the embattled company to cut deals with cable operators they had previously squabbled with and ensures those operators won’t ransack TiVo’s business by offering as many of their own cut-rate DVRs. “A significant opportunity,” is how Wible described the moment for TiVo.
Some even began speculating about the company as a takeover target.
But a number of dark clouds fill the sky.
EchoStar continues to say it will challenge the ruling as well as the injunction TiVo now says it will ask for.
Given the satcaster’s history — it dragged on a battle against Gemstar for years — a quick resolution seems unlikely, especially given that an injunction would further bruise EchoStar’s efforts to keep customers from switching to cable.
Legal experts, meanwhile, believe TiVo’s victory was not all-consuming. The company, for instance, likely won’t be able to challenge network recording services like Time Warner’s Start Over since it doesn’t allow simultaneous play and record.
“As much as TiVo wants its patent to smell like a broad software patent, the patent is and reads like a hardware patent, which could limit its application,” wrote financial-services firm Ladenburg Thalmann in an investor report.
What’s more, TiVo can only wave the ruling at some potential competitors, having previously brokered peace deals with some of the nation’s largest satcasters and cablers. It recently signed what amounts to a non-aggression pact with DirecTV through 2010.
And an earlier deal with Comcast essentially means the company’s largest cable operator already pays a relatively small fee to license TiVo’s technology.
Cable operators will be in a much more negotiable position, say experts like Badding who notes, “DVRs are a great means of marketing and customer-retention.”
But experts acknowledge DVRs are not a key part of these companies’ bottom line, which may make them loathe to pay the big licensing fees TiVo will be gunning for.
When the deals are all brokered, TiVo may not even exist as a standalone firm. Rumors in the financial press of TiVo as a takeover target continued Monday, with Yahoo, Apple and others floated as possible candidates.
In the short term, such rumors are good for a company’s stock. In the long term, TiVo’s prospects may be stuck on pause.