- JP Morgan continues to be positive on DivX (NASDAQ:DIVX) following management meeting saying US retail channel checks suggest CE licensing momentum is tracking expectations. DIVX pegs penetration of the US DVD market at 19%, up 5 points from August, however this seems conservative. Channel checks indicate ~50% share of DVD/DVD-R models, 20% share of HTiB devices.
Many digital media distribution partnerships and initiatives have been announced recently by the likes of Walmart, Amazon, BitTorrent, Tivo, TimeWarner, CinemaNow, MovieLink. DIVX's perspective is that many of these arrangements will ultimately lead to implementations that require Codec for distribution, storage and interoperability of 'lean-back' content. However, aside from expressing an interest in partnerships with Google, Microsoft, Ebay, Amazon and Yahoo, the firm does not believe DIVX is close to forging a formal distribution arrangement with tier 1 content providers at this time.
Separately, the CFO stated that DIVX is actively considering a secondary share offering. The CFO sees a desire on the part of at least one early-stage investor (VCs, not employees) to diversify, counter-balanced by institutional investor demand. The CFO dismissed the idea of issuing primary shares, unless associated with an acquisition.
JPM's impression is that the company is executing to plan, though the CEO acknowledged that Stage 6 feature-sets are slower to come to market (not true of the underlying infrastructure) than desired. The CE testing lab appeared to be operating at 100% of physical capacity (DIVX will be leasing new space in the new year).
Reits Overweight as the firm believes DIVX should trade at a premium to its nearest peers, Dolby and DTSI (mean multiple of 32.7x FY07E PF EPS), owing to superior growth prospects, and potential upside from strategic initiatives.
Notablecalls: Let me see if I got this one right. DIVX is trading at a hefty 31x 08 EPS, the CFO is hinting they are considering a secondary share offering, the co is not even close to forging a formal distribution arrangement with tier 1 content providers and it looks like they need to add capacity soon. Also, the CEO acknowledged that Stage 6 feature-sets are slower to come to market. On top of that JPM is reiterating their Overweight rating. Still wanna buy the stock? Hey! Wait! I have this bridge here....
Many digital media distribution partnerships and initiatives have been announced recently by the likes of Walmart, Amazon, BitTorrent, Tivo, TimeWarner, CinemaNow, MovieLink. DIVX's perspective is that many of these arrangements will ultimately lead to implementations that require Codec for distribution, storage and interoperability of 'lean-back' content. However, aside from expressing an interest in partnerships with Google, Microsoft, Ebay, Amazon and Yahoo, the firm does not believe DIVX is close to forging a formal distribution arrangement with tier 1 content providers at this time.
Separately, the CFO stated that DIVX is actively considering a secondary share offering. The CFO sees a desire on the part of at least one early-stage investor (VCs, not employees) to diversify, counter-balanced by institutional investor demand. The CFO dismissed the idea of issuing primary shares, unless associated with an acquisition.
JPM's impression is that the company is executing to plan, though the CEO acknowledged that Stage 6 feature-sets are slower to come to market (not true of the underlying infrastructure) than desired. The CE testing lab appeared to be operating at 100% of physical capacity (DIVX will be leasing new space in the new year).
Reits Overweight as the firm believes DIVX should trade at a premium to its nearest peers, Dolby and DTSI (mean multiple of 32.7x FY07E PF EPS), owing to superior growth prospects, and potential upside from strategic initiatives.
Notablecalls: Let me see if I got this one right. DIVX is trading at a hefty 31x 08 EPS, the CFO is hinting they are considering a secondary share offering, the co is not even close to forging a formal distribution arrangement with tier 1 content providers and it looks like they need to add capacity soon. Also, the CEO acknowledged that Stage 6 feature-sets are slower to come to market. On top of that JPM is reiterating their Overweight rating. Still wanna buy the stock? Hey! Wait! I have this bridge here....
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