By Tiernan Ray
Shares of interactive television software supplier Rovi (ROVI) are up $1.51, or 11%, at $15.85 after the company last night reported Q3 revenue and profit that comfortably beat consensus estimates, and projected the full year&’s results higher as well.
Price targets and some estimates are going up, though not from everyone. There is a sense revenue growth is challenged, if you will, while the company is able to make up for it on the bottom line.
Todd Mitchell with Brean Capital, who has a Buy on the shares, raised his price target to $20 from $17, after raising his 2012 estimate for profit to $1.85 from $1.65 previously, while raising his 2012 estimate by just $1 million, to $665.
Mitchell raised his 2013 profit estimate to $2.10 from $2, but keeps intact his $688 million estimate.
Writes Mitchell, &“Upside for the quarter was due to better than expected CE segment revenues, while an improved outlook for 2012 non-GAAP EPS is the result of $30+ million in annualized cost reductions.&”
He&’s most encouraged by the fact that &“Management’s “back to the basics” strategy gives us even greater confidence that Rovi can drive sustainable 20% EPS growth.&”
Cowen & Co.&’s Robert Stone, reiterating a Neutral rating on the stock, cut his outlook for this year&’s revenue to $664.9 million from a prior $667.3 million, even though he raised his EPS estimate to $1.85 from $1.65.
And even one bull was disappointed enough to cut his price target.
Mark Harding of JMP Securities, who has a Market Outperform rating, cut estimates for this year and next, and cut his price target to $20 from $31, writing that the company faces slowing trends in both the consumer electronics and the service provider market, which is tough given that last quarter shown specifically because consumer electronics made up for the carrier shortfall:
3Q12 revenue upside was driven solely by significantly better than expected CE revenue, more than offsetting disappointing service provider and other revenue […] Our 2013 revenue reduction is based on a reduced outlook for service provider ad revenue growth as well as slower monthly sub-ARPU growth, while our CE reduction is due to a deteriorating CE outlook and DIVX weakness.
Harding cut his estimate for this year to $668.4 million and $1.86 per share in profit from a prior $676.7 million and $1.85. For 2013, he goes to $678.7 million, down from $715.6 million, while raising his EPS estimate 3 cents to $1.95. He notes that Rovi&’s outlook for 2013 offered back at the end of Q2 was for about $715 million, but that last night the company offered &“very little insight into 2013.&”