Vizio (VZIO) became public last Friday and it appears to have flown largely under the radar which I’d attribute to all the other crazy things happening last week. I didn’t even know about it until shares were already for sell. The shares went on sale in the 17-18 dollar range, way under the proposed 21-23 range.
As of last Friday VZIO has put 15.2 million shares for sale on the market. The company’s total shares outstanding as of 2020 was ~144million (these aren’t on sale, just held by inside investors). At the current stock price of 24.5 that puts the company’s market cap at about 3.5 billion. According to RH VZIO’s current P/E is about 4.45, which is insanely low for a well known brand and a growth stock, which leads me to believe the stock is majorly undervalued. The stock price could easily quadruple to put the P/E around 20 which is more inline with competitors.
The last couple of years VZIO has transitioned from being just a hardware company selling TVs to also becoming a streaming server provider. Because of the low margins on this service it has become a huge income stream for them and a source of extraordinary growth. Think of their streaming service like Roku, but actually built into the TV.
The net income increase was largely due to the profits from their Platform+ revenue which has grown 304% from $36.4million in 2018 to $147 million in 2020. The CEO states that the company plans to reinvest that money into the hardware side of the business to develop better TVs.
Another bonus is that the CEO has deep ties to Asia manufacturing which has proven to be extremely helpful in them securing required components for their TVs and keeping their supply lines healthy while competitors face shortages.
Taken form the prospective document as of December 31, 2020, Vizio had $207.7 million in cash and $625.8 million in total liabilities.
The HD TV market is growing and expected to grow substantially in the next few years. As of 2020 Vizio also made up the third largest brand of HD tvs in American homes, so it has massive name recognition. VZIO has a lot of big rivals to compete against in this growing market that may try to take out the smaller competitors.
The name recognition might help VZIO’s potential for acquisition by a large player seeking to quickly enter the Smart TV/connected home market by buying out an established brand. In the past VZIO has shown it is willing to sale. It was supposed to be purchased by a Chinese company a few years ago, but the deal fell through.
In the short-term all the stimulus will likely keep demand for TVs purchase high, which makes short term prospects for VZIO look pretty good. The long-term potential for growing their operating margins through streaming services, a ever growing TV market, and the potential for buyout makes them a solid place to park some money.
The company is profitable, growing in the streaming segment, increasing earning, and has all the right ingredients to become a big player in the next generation of connected TVs by offering a TV + streaming service similar to ROKU but in one piece of hardware. Also, there’s only 15 million shares on the open market so a lot of demand can cause a big increase in the stock price in the short term.