Through The Fly's Eyes: Macrovision Corporation
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
Guarding Your Digital Content
The profits of many firms are increasingly dependent on the security of proprietary digital content. An outfit in Santa Clara, California is among the better known providers of digital life-cycle management solutions.
Macrovision Corporation (MVSN) provides anti-piracy and content protection technologies, digital rights management products and embedded licensing technologies that enable firms to protect, enhance and distribute digital content. The company's copyright protection and video scrambling methods are used by commercial videocassette duplicators, music labels, software companies, set-top decoder manufacturers and the major motion picture studios. Clients include 3M Corporation (MMM), Broadcom (BRCM), Cisco Systems (CSCO), Eastman Kodak (EK), Electronic Arts (ERTS), Motorola (MOT) and Nokia (NOK).
The firm pleased investors earlier in the month, when it announced Q1 EPS of 27 cents and revenues of $65.2 million. Analysts had been looking for 23 cents and $65.1 million. Management also guided Q2 EPS to 24-27 cents (26 cent consensus), Q2 revenues to $65-$68 million ($67.3M consensus), FY07 EPS to $1.25-$1.35 ($1.27 consensus) and FY07 revenues to $280-$290 million ($287.8M consensus). Jefferies subsequently upgraded the shares to "buy" and boosted its price target to $31. The MVSN price popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with five "strong buys" and six "buys." Analysts see a 21% growth rate, through the next year. The MVSN Price to Book ratio (2.84), Price to Free Cash Flow ratio (18.18) and EPS Growth rate (127.72%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $18.84 and $29.20. A stop-loss of $23.60 looks good here.