Notable Street calls on digital business stocks, annotated:
Tivo (TIVO): Citi actually likes this one. They are optimistic regarding Tivo’s plan to monetise DVR advertising and maintain “buy” rating and $10 target. They reason that as DVRs expand their presence in the American home from 20 million today to around 50 to 60 million in a few years, the traditional TV advertising paradigm will shift. Since DVRs will be able to actually rate commercials for the first time, DVR advertising represents a substantive value to advertisers trying to more effectively tailor and target their ads. [Yes, but the question is whether TiVo will actually capture any of this].
DirecTV (DTV): Citi believe there is a 75% chance of a tender offer from Liberty Capital, $30 target.
Expedia (EXPE): Citi cites concerns about new management, competition from meta-search engines, and hotel margin pressures. [Boy, sure sounds like a winner.]
TV Ratings (GE, NWS): Goldman: NBC a winner this week with “American Gladiators. Fox continued to benefit from College Football, though numbers were down 10% for the bowl games y/y. [Interesting, but immaterial to the stocks]
Micron Technology (MU): Citi sets a $17 target for Micron, up more than 100% from current $6. Volatility in the pricing of Dynamic Random Access Memory (DRAM), which makes up roughly 50% to 70% of revenue, makes the stock extraordinarily volatile. Micron is trying to diversify into NAND (a type of flash memory) in order to mitigate some of this volatility, but it is still subject to the highly cyclical nature of the PC and semiconductor markets.
Real Networks (RNWK): Pacific growth likes Rhapsody. Its analysts conclude that a “growing [number] of devices supported & optimised for Rhapsody is extending the average life of a sub, which should reduce churn and/or increase sub growth.” Additionally, a number of new partnerships with Tivo, Philips, MTV & Control4 promise to yield lucrative deals and opportunities for growth.
Texas Instruments (TXN): Citi expresses confidence in TI’s management, which it says has a “strong record of solid execution.” TI’s “strong balance sheet” is offset by risks regarding the company’s lack of a strong 3G baseband product and concerns about inventory management.
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