3SOF

DIVX: Q1 EPS 10c vs 11c Misses 13c Est; Guidance In-Line with Consensus
Wednesday, May 02, 2007 06:30ET

QUARTER RESULTS
DivX, Incorporated (DIVX) reported Q1 results ended March 2007. Q1 Revenues were $20.22M; +44.33% vs yr-ago; BEATING revenue consensus by +2.07%. Q1 EPS was 10c; -9.09% vs yr-ago; MISSING earnings consensus by -23.08%.

Q1 RESULTS    Reported      Year-Ago     Y/Y Chg      Estimate    SURPRISE
----------  ------------  ------------  ----------  ------------  ----------
Revenues:      20.22M       $14.01M     +44.33%       $19.81M      +2.07%
----------  ------------  ------------  ----------  ------------  ----------
EPS:                10c           11c           -9.09%               13c             -23.08%
----------  ------------  ------------  ----------  ------------  ----------

GUIDANCE

Q2-07 Revenue Outlook [$16.7 - $18.7M]: DIVX expects Q2 revenue to be in the range of $16.7 to $18.7 million. The Q2-07 revenue forecast is in-line with current consensus estimates.

&
the reason for the drop:

DivX "buy", target price reduced

Wednesday, May 02, 2007 4:11:30 AM ET
Montgomery & Co

NEW YORK, May 2 (newratings.com) - Analysts at Montgomery & Co maintain their "buy" rating on DivX Inc (ticker: DIVX), while reducing their estimates for the company.
The target price has been reduced from $30 to $24.

In a research note published this morning, the analysts mention that the company has reported its 1Q results broadly in-line with the pre-announcement. DivX has issued disappointing guidance for 2Q, with the midpoint of the revenue guidance of $16.7-$18.7 million short of the prior estimates and the consensus. The company expects its operating expenses to increase going forward, since it is increasing its headcount. The EPS estimates for 2007 and 2008 have been reduced from $0.60 to $0.52 and from $0.85 to $0.78, respectively.

new 52 weeks low 

1)
InvestorInstantMessaging: DivX, Inc. Reports Quarterly Results
Thursday , May 03, 2007 04:48ET
May 03, 2007 (M2 PRESSWIRE via COMTEX) -- InvestorIM has been created as a tool for the average investor. The idea is simple, a website where the world can communicate. Do you have a stock related question, then why not ask 50,000 individual members? Are you a shareholder of DivX, Inc. (NASDAQ:DIVX)? Join the many members engaged in this stock right now. Come see for yourself at www.investorim.com for your complimentary subscription.
Divx Inc. late Tuesday reported first-quarter net income of $3.66 million, or 10 cents a share, up from $3.28 million, or 11 cents a share, in the first quarter of 2006. The San Diego-based software company said revenue in the three months ended March 31 rose to $20.2 million from $14.1 million a year ago. Analysts polled by Thomson Financial were expecting, on average, a per-share profit of 14 cents on revenue of $19.8 million. For the second quarter of 2007, Divx expects revenue of $16.7 million to $18.7 million. Analysts are looking for revenue of $18.2 million.
2)
DivX "buy", target price reduced

Wednesday, May 02, 2007 4:11:30 AM ET
Montgomery & Co

NEW YORK, May 2 (newratings.com) - Analysts at Montgomery & Co maintain their "buy" rating on DivX Inc (ticker: DIVX), while reducing their estimates for the company.
The target price has been reduced from $30 to $24.
In a research note published this morning, the analysts mention that the company has reported its 1Q results broadly in-line with the pre-announcement. DivX has issued disappointing guidance for 2Q, with the midpoint of the revenue guidance of $16.7-$18.7 million short of the prior estimates and the consensus. The company expects its operating expenses to increase going forward, since it is increasing its headcount. The EPS estimates for 2007 and 2008 have been reduced from $0.60 to $0.52 and from $0.85 to $0.78, respectively.

3)
DivX to Webcast at Upcoming Financial Conferences
Wednesday, May 16, 2007 08:00ET
SAN DIEGO, May 16, 2007 (BUSINESS WIRE) -- DivX, Inc. (NASDAQ:DIVX) today announced it will be presenting at the following two financial conferences:
-- JP Morgan 35th Annual Technology Conference in Boston, MA on Tuesday, May 22, 2007 at 10:40 a.m. ET.
-- Cowen and Company 35th Annual SMid-Cap Technology Conference in New York, NY on Wednesday, May 30, 2007 at 2:30 p.m. ET.
All Web casts will be available on the company's investor relations Web site at http://investors.divx.com.

Well ...this one didnt turn out to be ultimate  stock to own 
I made decent $'s during initial bull run though. Wont touch it untill the chart shows signs of recovery.

i bought a small amount of shares today at 13.2.....

this is too freaking low .........

Way oversold........

target 17+ ............. no need freaking 25+.............

I read about a partnership between DIVX and HAUP at HAUP's thread and thought of bringing this thread/stock to the Watch List.

I'll post some analysis later.

One of the main concerns I always had on DIVX (back when Ramsburg loved the stock) was the possibility of dilution after the IPO. Well, that never happened, in fact, the company has been buying back its own shares aggressively in the open market (1.4 million shares bought back in Q1 08 alone).

The cause for the 81% top to bottom drop was simply and mainly due to ... an earnings multiple contraction. Really, more than the change in fundamentals, what seems to move stocks over the medium term are changes in the valuation investors are willing to attach to a certain company, which depend heavily on their animal spirits, or confidence to invest. Now, the level of "confidence to invest" and its changes are hard to measure.

Buffet has a curious line on this subject, which is: "Be fearful when others are confident and confident when others are fearful". He usually buys low p/e stocks, giving him what he calls a margin of safety. I guess that if stocks have a low p/e, it is because investors are fearful of the future, and therefore one should be confident.

Of course, this doesn't work all the time (I still didn't learn the distinctions there are to make, in order to know how to differentiate good low p/e stocks and bad low p/e stocks). Well, I feel I still don't know what is a good stock and what isn't. This game is a lot more complex than I initially thought. Maybe someday I'll learn enough, and the game will be as easy as I thought when I made my first trade in 1996.

Well, but this is about DIVX.

According to analysts estimates, and I agree with them, DIVX will earn $0.74 per share in 2009. It is therefore valued at 12 times forward earnings. This compares to a p/e of 50 around the company's IPO and an historical average of 24.5:



And the company continues to grow its global market share:



I'm not going to explain much further why I like DIVX, because it is explained much better in the three analysis I'll attach. If you're interested in these analysis, download and read them.

If you're not interested, there's no problem at all.

The plan is:

Buy DIVX around the open, 6.66% of capital, as usual.

Update:

I traded DIVX here for the 3SOF Portfolio soon after the IPO, my reasons at the time were more related with me being a huge fan of their concept rather than any rational valuation. Anyway, it was a nice trade, even if it never got it much above the $30’s like I was previously expecting
After that, the technicals started to signal danger, and the stock was already trading at premium multiples…

After all this time, I still love their concept, they are still growing as expected and working on the way to be a global standard in video compression… but now DIVX is trading at much interesting prices.

From a technical perspective, DIVX developed a big island reversal bullish pattern, and the price action has been working in conformity with this pattern (even if the typical pattern is no so long). The stock breached out it’s EMA-50 and is heading to a descending resistance which is located near the $10.50 level. The short term support level (in case of further consolidation) would be near $8.5 level.

Like David mentioned, the stock is trading at very low multiples, and apparently there is no reasons for that to happen since their numbers have been strong. I would recommend a fast read on the last JPMorgan’s note of Research already posted by David, JPM is currently expecting a Fwrd EPS of $0.80 for 2009:



Just to add to this topic, I also gathered the detailed estimates from all analysts covering DIVX with dates of last updates:



JPM usually takes the lead on this kind of upgrades, so I would expect further upgrades from other analysts during this quarter which would be a nice catalyst for the stock.

Trading Plan:
HOLD DIVX

Regards,

Update:

DIVX has been running since the last update, testing the descending resistance for a few days and finally making today a first breakout attempt. The session was quite volatile, and the stock couldn’t hold the highs of the day, but still closed above the breakout zone and up 2% over increasing volume.

Technically speaking, this kind of candle suggests some kind of consolidation for short term, which makes sense when joining it with the resistance level and normal breakout volatility.
We’re up 10%, but unfortunately the only valid support is still a few ticks below our entry zone (the EMA-50), with that I mean that short term volatility may affect our open profit in case of a normal consolidation / market noise. To the upside, and if DIVX manage to hold above this breakout level, I see the EMA-200 (aprox $12) as the natural next step.

The catalyst for today’s session, was another upgrade, this time from Barrington Research. JPMorgan also posted some positive comments about DIVX today (once again).
You can checkout both complete documents here (I’d recommend a quick read on Barrington’s Research, that is still only predicting a 0.63 EPS(FY-2009), below JPMorgans estimates):

  ------

With this new upgrade (and probably we’ll continue to see more within short term) the new estimates consensus is:



So the new consensus 2009-Fw EPS is 0.675, which puts DIVX trading at 14.66 times (fw) earnings. I don’t have sector estimates for 2009, but the sector 2008 est P/E is 27 against only 17 for DIVX. This kind of context continues to give DIVX a lot of upside potential regardless of this short term rally.

Soon we’ll be introducing a stop level for this position, but not yet. So the trading plan is the same for now:

Trading Plan:
HOLD DIVX

Update:

After the recent breakout, DIVX kept trading above the breakout area, which by now it’s a great signal. The expected outcome of this layout would be another extension on its up swing (probably to the 200-EMA near $12), the other scenario would be an extended consolidation to its 50-EMA near our entry price.
At this point I’m confident about the fundamental backup on this play and I think the reward / risk ratio is still good, so let’s wait for technical developments.

BOE Research Services also initiated coverage about DIVX, starting with a HOLD Rating and estimated PT of $10.61. Their estimates are by far the most conservative from all research notes I’ve read about DIVX, BOE estimate just $0.28 EPS for 2008 (and $0.61 for 2009).

The research note:



A summary of their thesis:

Quote
We initiate coverage on the shares of DivX, Inc. (DIVX) with a HOLD rating and a $10.61/share intrinsic value estimate. Based on our Shareholder Value Analysis, DIVX is trading at a 6.7% discount to our intrinsic value estimate. Our rating and valuation estimate is based on the following factors:
Licensing Partnership with Leading Manufacturers of DVD Players, HD Television and Mobile Phones to Support Long Term Growth and Profitability: DIVX continues to strengthen its partnership with leading market players in the three primary digital media areas, namely DVD players, HD-Television and Mobile handsets. The company said global penetration of its DivX solutions in the DVD market stood at 42%, up 27% in FY07 from FY06. Further, the company renewed its contract with Samsung and Philips to license its digital media solutions across multiple product categories, in addition to DVD players.
Acquisition of MainConcept AG to Expand DIVX Application Base: In November 2007, DIVX acquired MainConcept AG, a leading provider of H.264 video compression technology for broadcast, consumer electronics and software markets, for $22 million in cash and stock. It also includes an earn-out of $6 million if MainConcept completes certain developments goals and financial milestones. The deal will enable DIVX to include H.264, a video compression technology widely used to deliver and view high quality audio-visuals on mobile phones and consumer electronics, in its solution suite. We believe the acquisition should help DIVX to expand its market and further broaden its licensing base to drive long term profitable revenue growth.
Outlook: Based on the company guidance and our outlook, we expect DIVX to generate an annual average revenue growth of 11.0% and an annual average operating margin of 21.3% over the next five years. Any issues related to the integration of MainConcept and a slowdown in the consumer electronic sales are some of the key risks to our estimates. Currently, DIVX trades at a 35 times projected FY08 EPS of $0.28 and at 16 times FY09 EPS estimate of $0.61. The multiple implies a PEG ratio of above one based on our 5 year average EPS growth rate of 19%.

Not a particular enthusiastic note when compared with most recent notes from JPMorgan or Barrington’s, but still showing interesting prospects and upside potential. I’m not aware about BOE, but their estimates are not being accounted for the market consensus estimates (at least in Reuters estimates).

Trading Plan:
HOLD DIVX

DivX Reaffirms 
Wednesday, May 28, 2008 12:14ET

May 28, 2008 (EarningsWhispers Guidance Summaries via Comtex) -- DivX Inc. (NASDAQ: DIVX) said at the Cowen & Company TMT Conference it continues to expect second quarter non-GAAP earnings of $0.09 to $0.11 per share on revenue of $20.5 million to $21.5 million. The current consensus earnings estimate is $0.10 per share on revenue of $21.3 million for the quarter ending June 30, 2008. The company also said it continues to expect 2008 earnings of $0.52 to $0.58 per share on revenue of $95.0 million to $100.0 million. The current consensus earnings estimate is $0.56 per share on revenue of $98.3 million for the year ending December 31, 2008.

This earnings guidance summary was provided by EarningsWhispers, a leading provider of earnings expectations - including corporate guidance announcements and analysts' expectations that differ from published estimates. http://www.earningswhispers.com

http://www.knobias.com/story.htm?eid=3.1.26856becc4ec63ccbdb0c33f7ca629ab861be9782c4b7b37b98694cf04d210bd

Update:

Quick chart update: DIVX finally closed above the $10 mark, giving a more solid tone to the recent breakout.
Personally I expect DIVX to reach $12 at any time.

Trading Plan:
HOLD DIVX

Update:

DIVX had a quick sell off during the recent market turbulence. As for now, this down move didn't compromise its pattern and can be considered a normal consolidation move. The 50-EMA is working as a support and as long as DIVX holds above this EMA I think this trade is secure, let's wait for further developments.

Trading Plan:
HOLD DIVX

Update:

I'm upgrading the trading plan adding a protective stop level.
I really like DIVX fundamental prospects, and technical layout, but due to current market volatility and current managing strategy we should use a stop. In this case I'm setting a stop slightly below the 50-EMA.

The new trading plan is:

Trading Plan:
HOLD DIVX  with a stop @ $8.50

DIVX stopped @ $8.50

Update:

Don't have much time to justify, but this is a speculative try to catch DIVX at extremely low prices near a support zone. I really like the fundamentals, trading at just  11 times 09 earnings, DIVX had a big correction, closing the big gap and touching the ascending support. Yesterday's candle suggests a probable rebound.

Some of JPMorgan's comments that are In Play:

Quote
DivX, Inc
**Overweight**
More Pieces of the Mosaic

Samsung's Omnia SGH-i900 Windows Mobile phone has been
certified as DivX-compliant, for both encoding and decoding.
The Omnia will be released in S.E. Asia in June and in Europe
soon thereafter. DIVX recently secured a multi-year agreement
with Samsung, and several Samsung F500 phones are now
certified for use with DivX. LG has also adopted DivX on the
Viewty.

We believe DIVX has released a beta version of its H.264 decoder
for testing (aka "Project Remoulade"). This is an important step
towards introducing a codec suited to the set-top-box and broader
mobile phone market. Management previously advised that the
H.264 codec would not be available before 2009.

DIVX traffic jumped again in June, placing the website back in the
global top 500, according to alexa.com. Unlike the April jump,
this seems to be unrelated to a new release of the codec, but it may
coincide with video file-sharing activity as college students
approach graduation.

Cisco projects a six-fold increase in Internet traffic from 2007 to
2012, according to a report in today's Wall Street Journal. Video
accounted for 5% of internet traffic in 2005, but is expected to
grow to 30% this year and 50% by 2012. Direct downloading
from websites is expected to grow faster than video file-sharing
(DivX's sweet spot), though both should grow. We believe DivX
remains close to becoming the elusive de facto standard for
compressing high bit-rate video.

Sony Pictures TV plans to launch a series called "Angel of Death"
on the web in 2009. Sony Pictures TV announced a partnership
with DIVX at CES in January, which suggests that DIVX will be
used to distribute Sony content at some point in the future.

We'll buy it today and we'll set a stop slightly below yesterday's low, our goal is to catch a nice rebound on this one.

Trading plan:
Buy DIVX this morning at or near the open, set stop @ $6.50