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Rovi Soars On Q4 Earnings; Focus Shifts To Comcast, Dish Renewals

Rovi ( ROVI ) stock jumped as much as 19% Friday to an 11-month high, following the company’s fourth-quarter earnings late Thursday that beat estimates, as revenue growth reversed four straight quarters of deceleration. The focus now shifts to first-quarter performance and Rovi’s ability to renew licensing agreements with Comcast ( CMCSA ) and Dish Network ( DISH ). Rovi provides technology for interactive TV program guides licensed by AT&T ( T ), Comcast, Time Warner Cable ( TWC ), Dish and others, used for interactive TV guides and video-on-demand services. It also provides advertising services, including Big Data analytics that provides TV-audience insights and ad campaign management in various entertainment sectors. It posted Q4 revenue of $149.5 million, up 11% year over year and topping the consensus estimate of $130.7 million. It was the first time in five quarters that Rovi revenue accelerated. It reported earnings per share minus items of 65 cents, smashing estimates of 37 cents. That reversed four straight quarters of slower EPS growth. Rovi stock was up 14%, near 20.50, in afternoon trading in the stock market today . During Q4, Rovi renewed a technology licensing agreement with AT&T, which now includes the DirecTV footprint, for a seven-year term, in addition to a renewed licensing agreement with Sony ( SNE ). “In 2016, Rovi is focused on successfully renewing our IP Licenses with Comcast and Dish and on building our product portfolio,” Rovi CEO Tom Carson said in  the earnings release . “We believe achieving these goals will help drive stockholder value for years to come.” While Rovi said it expects to successfully renew agreements with Comcast and Dish, its revenue and EPS from those agreements are not included in current estimates. Excluding revenue from Comcast and Dish, Rovi anticipates 2016 revenue of $490 million to $520 million and EPS less items of $1.35 to $1.65. Andy Hargreaves, analyst at Pacific Crest Securities, said the renewals with Comcast and Dish remain likely but are far from certain. “Rovi is in the latter stages of negotiations with Comcast and Dish, as the current deals expire over the next two months,” Hargreaves wrote in a research note. “Rovi’s history suggests it is more likely than not to complete the deals successfully, but a delayed negotiation or even a lawsuit remains highly possible, either of which could drive significant stock volatility.”

Who’s Courting Pandora Media: Apple, Amazon, Alphabet, Spotify?

Pandora Media ( P ) is in for even tougher competition in the months ahead, Edison Investment Research said Friday, as buyout rumors swirled the day after the leading online music company posted a Q4 earnings miss and reported that its listener base continued to shrink. The streaming music leader is in a heated battle with rivals, including Apple AAPL , Spotify, iHeartRadio, Amazon.com AMZN and Google owner  Alphabet GOOGL . “Competitive pressure is intense and is likely to get worse” for Pandora in 2016, wrote Edison Investment Research analyst Richard Windsor in an industry note Friday. “Pandora reported difficult Q4 2015 results, where bullish commentary by management was undermined by speculation that, behind closed doors, the company is up for sale.” Pandora represents “a big opportunity” for any company that can solve the company’s weaknesses with user growth and better monetization, he said. FBR & Co. analyst Barton Crockett identified Apple, Amazon, Facebook and Spotify as potential suitors. Not long before Pandora released its earnings Thursday, a New York Times report said there had been discussions about selling the company . According to the NYT, Pandora is working with Morgan Stanley to meet with potential buyers.  Pandora stock shot up  on that report. Pandora has declined to comment. Pandora stock was down 15% in afternoon trading in the stock market today , below 8, earlier hitting an all-time low of 7.10. Pandora stock has sunk nearly 50% the past year. Spotify Called Top Pick To Acquire Pandora Windsor said his top pick in the list of possible buyers is privately held Spotify, “but we are not convinced that it has the financial clout to absorb Pandora even after the hefty falls in its share price.” Apple, however, “is quite capable of crushing Pandora organically, Google remains a possibility as (video wing) YouTube is already a major source for free streaming music for millions of listeners. Amazon is another possibility, but its model of subscription only with Amazon Prime does not fit well with what Pandora has developed,” Windsor said. While Pandora registered an all-time high of 10% share of U.S. radio listening in Q4, the company also said its user numbers fell. Pandora reported 81.1 million active listeners in Q4, down from the 81.5 million in Q4 2014. While “Pandora is still arguing that it can rise to 100 million active radio users over time … we are not convinced,” wrote FBR’s Crockett in an industry note Friday. On the bright side, Crockett said, with Apple’s recent decision to start charging for its Apple Music service, “Pandora now has much less competition for free than it did (before),” adding that some smaller free services have also shut down following the higher rates imposed by the Content Royalty Board rate setting group. Apple discontinued free streaming on its service iTunes Radio on Jan. 28. Apple Music costs $10 a month. Pandora has an ad-free premium service for $5 a month. The Apple Music subscription streaming music service launched in June.

Big Stock Moves Friday For Techs With Earnings Reports This Week

Loading the player… Several tech companies reporting earnings over the latest week lifted in the stock market Friday as major stock indexes perked by more than 1%. It’s been a volatile trading week amid a market in correction. Twitter ( TWTR ) vaulted 10% in afternoon trading, erasing the week’s losses around its fourth quarter report that showed slowing user growth. It’s tweaking its user interface to be a little more like Facebook ( FB ), which currently gets a top stock rating from IBD: a best-possible Composite Rating of 99. (See the video for who’s highly rated or not, and more on the week’s earnings reports.) Akamai ( AKAM ) lifted more than 3% intraday in the stock market today after surging earlier in the week on its quarterly report. IRobot ( IRBT ) was up nearly 4%. Cisco Systems ( CSCO ) and Yelp ( YELP ) stock rose more than 2% by the afternoon. Pandora Media ( P ) plunged 14% Friday afternoon, amid a declining number of users for the streaming music service revealed in its quarterly report Thursday, plus competition from Apple ( AAPL ), highly rated  Alphabet ( GOOGL ) (with a 99 IBD Composite Rating) and Amazon ( AMZN ) in its business. “Pandora’s core profitability appears challenged by higher royalties and diminishing productivity gains, and its new service efforts appear expensive given the poor history of profits in the space,” Pacific Crest Securities analyst Andy Hargreaves said in a research report. Security firm CyberArk ( CYBR ) fell nearly 12%. Travel sites TripAdvisor ( TRIP ) and Expedia ( EXPE ) gave back 2.5% Friday afternoon. Both rose Thursday. Tesla Motors ( TSLA ) fell fractionally. Before Friday’s action, tech companies whose stocks had lifted this week around their quarterly reports included Cisco, Akamai and TripAdvisor, with big jumps, as well as Tesla and Expedia. On the downside were Pandora, iRobot, CyberArk, Yelp and Twitter. Image provided by Shutterstock .