Wednesday, August 08, 2007

Macrovision Corp (NASDAQ:MVSN): Actionable call alert!

Couple of firms are out in defense of Macrovision Corp (NASDAQ:MVSN) after the co reported lower quarterly profit on Tuesday as it failed to close a major deal and a royalty dispute cost it millions of dollars in lost revenue.

- Deutsche Bank notes final 2Q07 results were in-line with the negative pre-announcement. On a positive note, the large software deal that slipped has already closed in 3Q. The market is clearly concerned about the Motorola royalty catch-up and the bundled studio deal, but at the current stock price it would appear valuation is attractive even in a bear-case scenario. Firm reiterates Buy rating and $37 target based on improving results in 2H07, Mediabolic potential and a trough valuation.

If they assume a scenario in which Macrovision never collects Motorola royalties and studios do not adopt the bundled deals, we estimate MVSN will still generate $1.45 in EPS in 2008. This implies a valuation of 16x P/E and 8x EV/FCF, the cheapest valuations across our coverage group. DB believes the data points will get more positive in 2H07 compared to current expectations and views the current stock price as attractive.

- Piper Jaffray notes Macrovision's full year guidance hinges on the company's ability to successfully persuade Motorola to pay the disputed ACP royalties or, at the minimum, settle for a lesser amount, in Q4. If Motorola remains resistant and continues on the route to legal resolution, they believe this revenue will not be seen for multiple quarters. In their experience, royalty disputes can be messy and often take longer than expected to resolve. PJ is, therefore, removing all Motorola revenue (and resulting EPS) from their model. They do believe, however, that MVSN shares more than reflect the loss of Motorola revenue and feel that at current levels, the stock offers a favorable risk/reward.

Maintains Outperform while lowering tgt to $33 from $36.

Notablecalls: While there is trouble with MOT's royalty revs, the rest of MVSN's business continues to perform relatively well. They managed to close the large software deal this qtr which is good news. Generally, I continue to view MVSN favorably both as a L-T play and today as a bounce candidate.

The stock traded as low as $22 in after hours action, down close to 2 bucks from close. I don't see this as justified. If you can get MVSN around $23 here I suggest you grab it. The problems are out in the open and in my opinion, fixable. Actionble!

1 comment:

Timothy Hussar said...

Great call