DIVX encore!
DIVX closed @ 20.72 on Friday.
I recommend buying the stock on any dip from here if we get any. I believe it is almost time for the stock to rally once again. The reason is, if rumor is true, that Google is in talks to acquire YouTube. Remember that Google is a customer of DIVX, representing 20% of DIVX's business. I assume that DIVX had been generating income from Google Video. Now if you add YouTube, the number one video site in the entire internet universe with over 100 million downloads/uploads per day, it could be big windfall for DIVX. (Of course, i'm assuming Google gets YouTube and that Google uses DIVX's technology for the YouTube site.)
Buy buy buy!
Intermediate to longer term play.
I recommend buying the stock on any dip from here if we get any. I believe it is almost time for the stock to rally once again. The reason is, if rumor is true, that Google is in talks to acquire YouTube. Remember that Google is a customer of DIVX, representing 20% of DIVX's business. I assume that DIVX had been generating income from Google Video. Now if you add YouTube, the number one video site in the entire internet universe with over 100 million downloads/uploads per day, it could be big windfall for DIVX. (Of course, i'm assuming Google gets YouTube and that Google uses DIVX's technology for the YouTube site.)
Buy buy buy!
Intermediate to longer term play.
posted by beanie11111 | 5:23 PM
12 Comments:
Beanie,
I did buy some divx for 21.36, do we have to worry about the high pe, it's about 58 now. How long do you think I should keep it? I only got 60 shares and would be adding more.
sgv,
no you don't to worry about the PE at this point. The reason is the company is growing very fast.
http://finance.yahoo.com/q/is?s=DIVX&annual
This year i expect DIVX to make over $60 million in revenues. That's 100% growth year over year for the last 3 years!
With that kind of growth, PE of 58 is not expensive at all. Earnings is also good.
I am very confident DIVX will see north of $30 in the intermediate term.
sgv,
I think it's a good idea to keep buying on any dips and hold it to "close" to a double, so that you can sell 1/2 and ride the rest for free.
If you don't like to wait for that double, then of course you can take profits anywhere you like. I just think it will see $30 (probably by the end of the year if not sooner).
Note that if the stock market collapses, obviously all bets are off.
To get on my email list, where i sometimes send you a stock pick, please send an email to bumblebee999@gmail.com .
Beanie
Beanie - You need to do a better job with your due diligence if you are going to make such outragous claims. Go back and read the S1. Google does not use DivX, DivX makes their 8% from getting customers to download the Google toolbar when people install the DivX player.
In reality Google is actually a competitor to DivX because they are using a flash based codec. There is some concern that as Google toolbar and the DivX player hit market saturation that this 8% could very much be at risk.
You are right about the PE not being the issue that investors should look at, but way off base on what will be the catalysts for the stock. Instead of listening to Crazy Cramer, you should learn to think for yourself. It's not the pigs that get slaugthered, it's the lambs.
Davis,
Thanks for that "concern". I've been
reading beanie's blog for about a year
now and I did pick up some good ones.
The latest was RVBD. I do some more exhaustive research if the stocks is really worth considering. Again thanks
for the insight- that is something to
think about. AND I am not a novice investor, been doing it on and off for the last 20 years, but finding my interest growing these past 3 years.
David Freeberg,
I was actually wrong. Google did not represent 8% of DIVX's revenue; it actually represents 20%! That is potentially huge for DIVX if the YouTube deal goes thru, imo.
DIVX gets paid from advertising fees as well as GOOG bundling the DIVX software with their own offerings.
A recent CES 2006 gives an interesting angle on how DIVX may continue to make money from GOOG:
[CES 2006: Divx to cooperate with Google, schedules launch of video download service
Wolfgang Gruener
January 7, 2006 15:28
Las Vegas (NV) - One of the major trends at CES 2006 is the creation of partnerships between technology and content companies as well as distributors. Even Divx, with an estimated 50 million users worldwide one of the most popular video players and formats out there, adopted this strategy and announced a cooperation with Google.
According to Divx representatives, the talks are in a very early stage and details still have to be discussed and determined. However, Divx' role in Google appears not be in direct connection with the search engine's announcement of a commercial video download service. Instead, Divx will help Google to move video content across various device types and ultimately onto the TV screen. Of course, content will only be able to be moved, if it carries a digital rights management platform and if devices are "secure. Susan Wojcicki, Google's vice president of product management said that "Google video's goal is to make the world's video content more accessible" to people. "We want to reach a point when consumers can easily access the content that is important to them from Google whenever they want and enjoy that content on a variety of devices."
]
That being said, i am pretty confident that DIVX will go higher the next trading session, although i would like to see a morning dip so we can scoop in cheap.
As a trader to traders, i recommend you all pay attention to DIVX. Taking your eyes off the ball may result in losing potentially huge profits.
With GOOG representing 20% of DIVX's revenue, it could be disastrous for DIVX if GOOG decides to pull out. But indications are that probably won't happen anytime soon, especially when it has only been 9 months after the january CES that spokespeople from DIVX said they were at the early stages of a deal. The deal may have already been consumated by now. Imo, deals like these usually last several years.
"Divx will help Google to move video content across various device types and ultimately onto the TV screen."
That pretty much means to me that DIVX will get paid to move videos, which means Cramer is correct about DIVX getting paid when people download videos.
Again with the outragous claims. You cite an article 10 months old about "early talks" with Google, yet here we are almost a year later and DivX hasn't announced any progress on this "pending" deal. In fact, if you go back and read the S1 like I suggested, you'll see that DivX actually goes as far as to say that Google is a competitor to DivX, not a partner. Now you can bet that Google buys YouTube and then makes a deal with DivX, but until they get a deal with Google in the first place, I see this as speculation on top of more speculation. A YouTube acquisition isn't going to help DivX anymore then if DivX was negotiating directly with YouTube because they still don't have a deal with either company. If they do get a deal with Google, you are right that it would be huge, but without that deal first, it's irresponsible to suggest that a YouTube acquisition somehow benefits DivX.
I'm not sure where your think DivX is getting their "advertising revenue" from but this is false. If you follow the company as closely as I have you would know that DivX makes their money by licensing their codec to CES firms. This by far represents the lionshare of their revenue and the reasons behind their high gross margin business. These deals are 1 - 2 years in length and are exposed to a high degree of uncertainty especially as downloading moves away from pirated sources (the main source of DivX content today) and towards legitimate downloads that may or may not end up using DivX technology.
The only advertising revenue that DivX makes is from selling the google toolbar installation when people download their DivX player. It has nothing to do with YouTube or Google video. They both use an entirely different video codec and I don't see that changing in the near future.
Having said that I like DivX and think that their stock should be worth about $28 per share based on my assessment of their valuation and their growth prospects, but this is because I think that they are positioned to benefit from the cell phone providers and not because of Google Video.
I would again caution you to take a closer look at the company and try to identify the REAL catalysts for this stock because so far you've identified two sources of revenue that are non-existent and it doesn't add to your credibility. If they end up getting a deal with Google, Yahoo or anyone, it would be huge for the company, but nothing is pending and if anything you should be pumping their recently released HDTV download solution or the Alpha stage testing of their cell phone solution, which is by far more interesting then a Google deal that has failed to materialize.
Cramer already exposed this stock to the day traders and while there may still be some upside, I think that there are much more attractive plays in this space. Yes DivX could be a solution, but they aren't the only ones with cool downloading technology and you would be much better served by making a play on a smaller cap tech solution that Cramer hasn't talked about then trying to play a stock that you clearly don't understand anything about.
I've followed this space very closely for the last two years and as an impartial observer I feel like my record speaks for itself.
I have no idea what the company is worth day to day, but when I see a clear pump and dump going on, it makes me suspicious as to why you think people need to pile on first thing on Monday morning.
Davis,
That is very interesting post, I did have some reservation even before the
ipo of DIVX. I actually decided just to buy one- RVBD which I think have a
unique technology. My interest in DIVX is to diversify my holdings. Thanks for the info. But DIVX is still an interesting stock even for a short term play.
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