Shares of Rovi (ROVI), the makers of online content guides and consumer digital video software, are down $15.77, or 34%, at $30.25 after the company last night missed Q3 revenue estimates slightly and said that it expects revenue to be toward the low end of a forecast for $770 million to $810 million this year because of weakness in the consumer electronics market, which licenses Rovi software.
On a conference call last night with analysts, CFO James Budge stepped through the challenges facing consumer electronics:
We anticipate the difficult global economy will persist as a challenge for the CE industry throughout 2012. Also, the impact of the natural disaster in Thailand, and its impact on the supply chain for hard disk drives could limit near-term revenue growth for our CE digital product and patent offerings. And as previously mentioned, we expect a meaningful drop-off in ACP revenues, which we expect to only contribute about one-third of the revenues in 2012 that they are expected to contribute in 2011. And as a result we anticipate CE revenues for the full-year 2012 to be flat when compared to expected 2011 CE revenue.
The reduced outlook implies results below analysts’ $798 million revenue estimate. And for next year, the company said pro-forma revenue will rise only by “mid to high single digits, which is below analysts’ models for growth of 14% or so, to $911 million in 2012.
Hence, today there are at least three downgrades, from Collins Stewart, CLSA, and Brean Murray.
John Vinh of Collins Stewart cut his rating to Neutral from Buy, and cut his price target to $40 from $75. He cut his 2011 estimate to $782 million from $795 million, and cut his EPS estimate to $2.42 from $2.53. For 2012 his numbers go to $827 million from $914 million in revenue, while he cut his EPS estimate to $2.44 from $3.16.
“We don�t see any near-term catalysts, as many of the growth drivers (TotalGuide) that we had been anticipating have been pushed to late 2012,” writes Vinh. “We recommend investors move to the sidelines and await a return to more meaningful growth.”
CLSA Asia-Pacific Markets’s Ed Maguire cut his rating on the stock to Underperform from Outperform, and cut his price target to $38 from $54.
“Growth businesses will take longer to ramp than expected and legacy consumer businesses are deteriorating more rapidly than anticipated,” he writes.
“This is a tough combination for the stock to weather.”
Maguire cut his 2011 estimates to $790 million and $2.47 per share from a prior $800 million and $2.55 per share. For 2012, he now sees $854 million and $2.80 per share, down from $921 million and $3.10 per share.
BMO Capital Markets’s Edward Williams is hanging onto his Outperform rating today, while cutting his price target to $52 from $75, and cut his 2011 estimates to $780 million in revenue and $2.40 per share from $795 million and $2.53 per share, and cut his 2012 estimates to $829 million and $2.60 a share from $922 million and $3.10 a share.
“Although the growth of its current generation products remains strong and the outlook for TotalGuide is also robust as it rolls out in 2012, the company�s analog and legacy businesses are deteriorating faster than we had anticipated,” writes Williams. “This performance is tempering overall revenue and EPS growth in 2012. We are modifying our expectations accordingly.”
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