On Jun 20, 2014, we issued an updated research report on Liberty Interactive Corp. (LINTA). Despite reporting weak financial numbers, we believe that the company’s TV home shopping business will continue to flourish. The QVC segment has transformed itself into a powerful global brand, which may help Liberty Interactive attain double-digit revenue growth.
Liberty Interactive has delivered negative earnings surprises in three quarters last year, with an average miss of 15.61%. The company reported weak financial results for the first quarter of 2014, where both its top and bottom line missed the Zacks Consensus Estimate.
Liberty Interactive’s QVC division is benefiting from the surge in online sales. Management predicts that its online sales will constitute more than 50% of the total revenue in the U.S. in 2014. The growing adoption of high-end smartphones in the U.S. is a major positive for the company. QVC has launched a synchronized content for mobile applications which allows smartphone users to get real time information about a product broadcasted on TV. This is expected to drive online sales further.
After Amazon.com Inc. (AMZN), QVC is the second-largest e-Commerce retailer in the U.S. Liberty Interactive holds approximately 38% of HSN Inc. (HSNI) and about 22% of the equity and 57% of the total votes of all classes of TripAdvisor Inc.’s (TRIP) common stock.
Notably, the company covers 300 million homes through 12 channels in eight countries. Recently, the board of directors of Liberty Interactive raised an existing share buy-back program by $1 billion.
In Dec 2013, Liberty Interactive’s e-Commerce business in the U.S. accounted for 50% of the total revenue for the first time. Moreover, in the U.K. and Japan, orders placed through mobile accounts represented over 50% of the total orders placed during the reported quarter. Exposure to international markets, such as Japan, Germany, Italy, and the U.K., will help QVC achieve a high rate of growth.
On the flipside, Liberty Interactive’s businesses are susceptible to rapid technological changes. Large cable TV operators are increasingly deploying digital TV networks, which is gaining significant market traction. This may adversely impact the channel positioning of Liberty Interactive’s networks.
Increasing deployment of personal video recorders, video-on-demand technology, and IPTV network are systematically changing the distribution and viewing habits of the common people. Meanwhile, these fundamental changes are taking a toll on the home shopping networks. Moreover, the home shopping and Internet retailing market place are getting competitive day by day. Meanwhile, the stock price of Liberty Interactive has soared over 34% in the last year and is currently trading at the high-end of its 52-week price range.
Liberty Interactive currently carries a Zacks Rank #3 (Hold).