TiVo Inc. (TIVO) shares made a strong move past the 100-day moving average last week following a three-week trading range. The next layers of resistance are at $11.50–$12, followed by the 200-day moving average. Support is at $11–$11.25 and the 50-day moving average.
Earnings are due out in late May, so the headline risk is removed until then. Analysts are looking for the company to earn $0.07 on revenue north of $91 million. The company beat estimates by $0.03 last time out, and shares reached a peak of $11.92 on the earnings beat in early March.
The company has topped estimates in three of the past four quarters, and another earnings beat could send shares soaring to the mid-teens if current momentum can hold. TiVo has also been on my list of takeover target candidates in recent years, as they are great at managing video and TV content. With the cable-cutting movement growing, TiVo makes great sense for managing content.
Last week, Arris Group, Inc. (ARRS) shelled out $2.1 billion in a cash-and-stock deal for Pace, a British set-top-box maker. TIVO sports a current market cap of just over $1 billion, and a $2 billion takeover bid would have shares trading into the low $20s.
A takeover of TiVo is pure speculation on my part, of course, but it has become more valid with the Arris Group/Pace marriage.
As far as its suitors, Apple Inc. (AAPL) makes the most sense if the company ever decides to make a television. Apple TV has been a nice success and, by adding TiVo, it would gain a great partner in an established industry leader.
TiVo pioneered the DVR experience and owns a number of intellectual properties that are extremely valuable. With earnings improving and the hot sector that it’s in, I like TiVo on both a fundamental and technical basis.
Buy the TIVO June 12 calls (TIVO150619C00012000) at current levels, around $0.35, for target $0.90. These are the regular monthly calls that expire on June 19.
InvestorPlace advisor, Rick Rouse, is offering a special free report, “The 5 Golden Rules of Options Investing,” that reveals his rules for options trading success that will help you make double- and triple-digit profits in the months ahead no matter what the market has in store. Just click here to read it right now.
Whether you’re new to options or have years of experience, the trading advice Rick will share can help you lock in bigger gains, find new winning ideas, wring the risk out of your trades and become a more confident and successful options investor. Click here now to download your FREE copy of The 5 Golden Rules of Options Investing.
