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TiVo (TIVO) Tumbles Despite Solid Subscriber Growth

NEW YORK (TheStreet) -- TiVo (TIVO - Get Report) shares fell, despite beating earnings estimates and posting strong subscriber growth. Shares tumbled 3.9% to $12.73 as investors grew bearish on the company.

The cable DVR provider reported third-quarter net income of 10 cents, 4 cents higher than analysts polled by Thomson Reuters had anticipated. Service and technology sales (excluding hardware sales) came in at $81.7 million, 34% more than the year-ago quarter, and beat consensus by $400,000.

Boosting sales were strong growth in cable television subscriptions. In the third-quarter, the company added 295,000 subscribers, likely lured by TiVo's offering which allows additional access to streaming services such as Netflix (NFLX) and YouTube. Its total subscriber base, which has grown for nine consecutive quarters, sits at approximately 3.9 million, 32% higher than a year earlier.

CEO Tom Rogers said in a statement the quarter marked "our strongest cable distribution results to date as well as best subscription growth in several years. In fact, [it's] the best quarter for TiVo subscription growth since TiVo began mass distribution of its technology and services in the cable DVR market."

For its fourth-quarter, the San Jose-based business foresees service and technology revenue between $83 million and $85 million, approximately 30% higher than the same period a year earlier. Forecasted sales were in line with consensus.

Analysts were mostly positive on the stock. Goldman Sachs raised its price target to $16 from $15, "as we continue to see stronger business traction and improving profitability trends as near- to mid-term catalysts for the shares."

Similarly, Jefferies reiterated a "buy" rating and raised its price target to $16 from $15, on the view the company is only 25% penetrated against the millions of potential subscribers.

BMO Capital Markets reiterated its "outperform" rating and $15 price target. "With what we believe to be a compelling valuation and positive growth trends, we continue to see TiVo as a solid play in the evolving advanced television landscape," wrote analyst Edward S. Williams.

Brean Capital remained positive, but with an asterisk. The investment firm maintained its $14 price target and "buy" rating, "but with the caveat that we would wait for a pull-back to be more aggressive."

TheStreet Ratings team rates TiVo Inc as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate TiVo Inc (TIVO) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, notable return on equity, reasonable valuation levels and compelling growth in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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