TiVo Inc.(NASDAQ:TIVO), which sells set-top boxes, has been upgraded by JP Morgan securities to `Overweight' rom `Neutral' on strong subscriber growth and expectations of a favourable ruling in its patents dispute with Verizon Communications.
The upgrade sent TiVo's shares up more than 5 percent to $9.5.The stock has risen 6.4 percent so far in 2012.
The company, which also licenses its digital video recording technology to cable operators, had reported second quarter results that surpassed analyst expectations.
While the sales of its video recorders soared, it also saw a 41 percent rise in subscriptions across the world, led by growth at Virgin Media.
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JP Morgan analyst Paul Coster wrote in a note: The company is adding customers like cable operators Com Hem in Scandinavia and GCI in Alaska, and is poised for higher adoption for its technology at ONO in Spain, Charter and ComCast Corp.
TiVo's advanced TV solutions, which integrate broadcast programming, video on demand and internet video with interactive ad content, appeal to smaller cable operators that need to defend against encroachment by new home entertainment rivals like Google and Apple Inc, Coster said.
TiVo, which owns hundreds of patents, earns a substantial portion of its revenue from suing other companies over patent infringements and winning them.
It had earlier this year reached a patent-related settlement with Verizon's rival AT&T Inc under which the mobile service provider agreed to pay TiVo a minimum of $215 million and monthly licensing fees.
A trial with Verizon is scheduled to begin on Oct. 1.
"We believe a Verizon settlement in excess of $200 million is possible but if this case goes to trial potential outcomes range from zero through multiples of $200 million," he said.