Steve, Stoss has been on target. So have you btw. There is no doubt(in my mind) that Iatv is the centerpiece of John Malone's ITV plans for the next millenium.
GKN Securities, Inc. Rating: BUY
ACTV, Inc. - (IATV-$21) November 18,
1999
Diluted EPS 52-Week
Range:....$25 1/2 - 2 1/4
1998 1999E 2000E Common
Shares (MM)........41.4
March ($0.17) $(0.23) Market Cap
(MM)...........$869.4
June (0.18) (0.14)
September (0.16) (0.08) 4-Yr EPS
Growth Rate......nm
December (0.47) (0.13) Dividend..................$0.0
Year ($0.98) ($0.58) ($0.13) Yield.....................0.0%
ACTV, Inc.?Raising Price Target to $35 per share due to demand for
HyperTV Product
We are reiterating our BUY rating on IATV recognizing that the stock has
just exceeded our prior price target of $21 per share. We maintain our
view that this stock should be purchased for long-term investors and
also recommend purchase for investors with a shorter-term horizon. Our
new 12-18 month price target is $35 per share up from $21 per share. We
believe the market is starting to understand, but has not yet recognized
the ultimate value of the company?s patent position, HyperTV product
offering, or the emerging trend of digital applications for cable TV.
Moreover, the industry in which IATV participates has seen valuations
soar over the last few months, and we feel that IATV?s current
valuation, is not in-line with other current peer valuations. One peer
comparison, Liberate, Inc. (LBRT--$151), has seen its market
capitalization rise 277% in just 6 weeks (Oct 1) from $1.8 billion to
$6.8 billion. Other peer current valuations, Wink Communications, Inc.
(WINK--$1.1 billion), TIVO, Inc (TIVO--$1.8 billion)and Liberty Digital,
Inc. (LDIG--$8.5 billion). All of these companies are in their infancy
and none have much in the form of revenues.
Over the last few months, the company has announced HyperTV contracts
with ShowTime (unit of Viacom), The Box Music Network (also a unit of
Viacom), New Line Cinema for the upcoming PPV launch of Austin
Powers-The Spy who Shagged Me and an interactive PPV event partnership
with Liberty Digital and Viewer?s Choice (which basically owns all of
PPV). The company has also moved to NASDAQ National Market trading
system giving them even more exposure.
Basic Analysis
The company has received a follow on investment from Liberty Media Group
(LMG). The Liberty Media Group has invested in IATV and will receive
new options in IATV that may be exercised over a five year period. If
these options are fully exercised, Liberty?s investment in IATV will
total more than $100 million, representing an estimated 25 percent
interest in the company. In our opinion, Liberty is ?eyeing? the
company?s HyperTV product that would enhance Liberty?s cable properties
by creating a vehicle for e-commerce over the Internet for these TV
networks. The concept is to stream data to a PC that is synchronized to
a TV program. HyperTV would receive revenue from a percentage of
e-commerce transactions, advertising fees and portal registration
opportunities.
E-commerce Applications---HyperTV?s concept of ?pushed? e-commerce
services (time-sequenced data to the PC coinciding with TV programming)
is an ideal way to create impulse buying over the Internet. It is also
a way for the cable TV networks to enhance their brands and generate
incremental revenues. With this in mind, we believe that HyperTV is an
ideal fit with Liberty Media?s cable properties. Liberty Media, which
owns all of or a stake in dozens of cable networks (including IATV),
could create HyperTV applications for its cable channels. Other cable
networks could also benefit. For example, a music video oriented cable
TV network (like MTV or the Box Music Network) running a Rolling Stones
video on its cable channel could allow viewers to log onto its web site
and have content pushed to them in time sequence corresponding to the
music video on TV. Viewers could also have the ability to buy the
Rolling Stones CD while watching it on TV simply by selecting purchase
with their PC?s mouse on the web site. When the next music video comes
on the TV (e.g., Billy Joel), the next set of pushed content
corresponding to the video content (Billy Joel information and purchase
capability) is sent to the viewers PC.
The potential exists for other high profile strategic partnerships over
the short to mid-term in addition to the expected launch of the
company?s individualized regional sports TV service called FOX Sports
Plus in the first quarter of 2000. Moreover, we believe that the
company will launch the first national individualized PPV event in the
first half of 2000 utilizing the company?s technology in conjunction
with IATV?s partner?s Liberty Digital and Viewer?s Choice.
We are most excited about the national events business for IATV. We
believe this area holds the largest upside to its shareholders and the
company. Individualized national PPV events could be an enormously
successful business. Imagine inviting friends over for an interactive
Super bowl party, or having the ability to choose which golfer you want
to follow around the Masters Golf Tournament. Every sporting event, or
any other TV event being filmed by a camera crew, could run all the
feeds and let viewers choose what they want. We forecast that IATV
could charge between $9.95 to $49.95 per event depending on the venue.
IATV?s individualized programming, which initially will be sports
related, allows the viewer to select from different camera angles,
player profiles, in-depth statistics, instant replay, scoring summaries
and a ?star cam? (e.g., follow around Shaquille O? Neal for the
basketball game). The company derives cable TV related revenues from
three distinct areas; monthly subscriber fees, advertising dollars and
national PPV events.
Monthly Subscriber Revenue?IATV intends to charge $9.95 per month for
regional sports FOX Sports Plus access. We expect the company to
roll-out its first market (Texas) in the first quarter of 2000. We also
forecast that the company will enter the Los Angeles market sometime in
the second quarter of 2000. Given a successful roll-out, we expect the
company to enter as many as 2 new markets in the second half of 2000.
Advertising Revenue--In addition to monthly subscriber revenue, IATV?s
technology would enable interactive advertising over digital cable
networks. For example, advertisers could place interactive
advertisements on its system. Users could choose which advertisement
they wish to view and interact with the advertisement (e.g., on a Toyota
commercial the user can decide to watch the feed about the Toyota Celica
rather than the feed for the Toyota 4Runner truck). This technology
could be a boon for advertisers because with the press of the user?s
remote control, information could be collected on each subscriber?s
viewing patterns. IATV participates in a percentage of the total
advertising revenue with the cable operator.
Another Partner, Fox Sports Net, Brings a Leading Brand Name in Sporting
Events for IATV to Leverage. Under an agreement with FOX Sports Net,
IATV has the rights to license FOX sports programming from each of FOX
Sports Net 22 regional affiliates reaching 58 out of 64 million U.S.
cable subscribers. This service will offer individualized FOX sports
programming to any distributor that carries the corresponding FOX sports
channel. The first initial sports to be covered include basketball,
baseball and hockey. IATV could also use HyperTV technology to
synchronize Fox Sports games with Internet delivered content in the
already agreed upon areas. This would serve two purposes. First, it
would allow users to get involved in the sporting event and give Fox
Sports and IATV new avenues to exploit the Internet. Second, it would
allow Fox Sports to advertise both companies individualized Fox Sports
service offered at $9.95 per month.
Anthony J. Stoss (212) 208-6597
Additional information available upon request. The information contained
herein is based on sources and data which we believe reliable but is not
guaranteed by us. This firm and its affiliated organizations and/or
their employees, officers, affiliates, or members of their families and
investment portfolios managed by such organizations, may have a position
in the securities, warrants, and/or options relating thereto and may
make purchases and/or sales of these securities, warrants, and/or
options relating thereto from time to time in the open market or
otherwise.
Southeast Research Partners, Inc |
