First Albany Initiates Coverage on TiVo With a Strong Buy

Editor’s Note: This post should not be construed as financial advice.

First Albany Corp. Initiated coverage of TiVo this morning with a Strong Buy on the stock and a $16 price target. The stock is up $1.10 on the news at $6.70 per share. Richard Baldry of First Albany released a research report this morning.

First Albany cites a number of reasons why they are positive on the stock.

1. Leading Product in Fast-Growth Consumer Growth Sector. They say that they believe that TiVo is the leading player in the emerging DVR market.

2. Comcast is the First Elusive Cable Partner.

3. Reoccuring Revenue Model Masked by Hardware Subsidization. First Albany says that one time hardware subsidizations have masked the ultimate value of TiVo’s revenue stream.

4. Profitability Targeted by End of Fiscal Year 2006. Given that the company has the ability to turn hardware subsidization on or off, First Albany says that they believe that TiVo can essentially achieve “at will” profitability.

“While many investors, viewed Comcast’s rollout of generic (non-TiVo) DVRs as a clear signal that it would never become a TiVo partner, an agreement was, in fact, reached in first quarter of 2005. Positioning TiVo as it’s “premium DVR” offering, the agreement also allows Comcast’s already-fielded generic DVRs to upgrade to TiVo’s service with only a software upgrade required. We believe similar agreements could, and likely will, be reached with other cable providers,” wrote Baldry.

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