It’s a scary time right now for media companies as consumers turn toward streaming rather than traditional cable. The industry is plagued by questions whether or not there is a future for TV as we’ve always known it. For TIVO Corp. (NASDAQ:TIVO) that’s absolutely the truth. Over the past year the firm’s share price declined 27% in 2017, but it looks as if TIVO stock is on its way to a rally in 2018.
TIVO stock has been on the rise over the past week gaining 8% on rumors that a buyout is on the horizon. Days before the end of the year, The Street reported that TIVO has had not one but “multiple expressions of interest” from private equity buyers. The offers value the company at about $2.5 billion or $20 per share.
Although TIVO has yet to comment on the news, investors are taking it as a positive sign for the future. The rumored buyout offers value the stock at almost $5 per share more than its current price and bodes well for shareholders who have ridden out an otherwise bumpy year.
Of course, buying a stock and hoping it will be bought out is extremely speculative, not to mention dangerous, but it’s worth noting that TIVO has some buyout buzz surrounding it.
The quickly changing media landscape draws a close parallel to what we’ve seen happen in retail, where shifting consumer preferences and new technology have left a graveyard of brick-and-mortar stores behind. However, unlike its retail counterparts, TIVO looks like it might be able to come out the other side on top.
TIVO made a name for itself by creating devices that were capable of recording TV programs and making them available to users to playback later. The box gave customers the freedom break away from broadcasters’ schedules and allowed them to skip over commercials.
However, as more and more people have started cutting the cord TIVO has had to change its devices to do more than simply record traditional cable. The company is now making its boxes capable of recording many different types of content- including popular streaming offerings like YouTube.
Not only do TIVO stock holders have a potential payday on their horizon if a buyout does eventually materialize, but the stock is also an enticing income play as well. TIVO offers a 4.77% dividend yield that makes waiting through the turbulence a little bit easier.
While its true that TIVO is certainly not bulletproof, especially in this environment, 2018 is shaping up to be a good year for shareholders. Buyout talk aside, TIVO stock has another potential catalyst in the coming year- the end of a long battle with Comcast Corporation (NASDAQ:CMCSA).
Last year the U.S. International Trade Commission ruled that DVRs that Comcast distributed violated TIVO’s patents on the technology.
There’s a chance that Comcast will appeal the decision, but the ruling means that TIVO will not only benefit from a one-time payment as a result of the patent violations, but it will also benefit from the licensing revenue that Comcast will be forced to pay while its customers use the devices.
In 2017, we saw TIVO broker technology licensing deals that bolstered its cash flow and management opted to use those dollars to reward shareholders. That means that in the coming year, the incoming Comcast money is likely to make its way to shareholders at least in part.
TIVO stock doesn’t offer the security or stability that you might find in elsewhere in media, but the company has proven itself to be capable of navigating through turbulent waters. The company looks poised to come out on the right side of the cord-cutting revolution, but investors may not even have to wait that long to reap the rewards.
While it’s certainly not the only reason to buy TIVO stock, a potential buyout in 2018 would also make for a nice payday for patient investors who were willing to wait out the bumps along the way.
As of this writing, Laura Hoy did not have a position in any of the aforementioned securities.