We reiterate our long-term Neutral recommendation on
Liberty Interactive Corp.
) following its mixed first-quarter 2012 financial results. We
believe the TV home shopping business will continue to flourish in
the near future as the global macro-economy is expected to
gradually stabilize compared with the massive fluctuations in the
last couple of years.
Liberty Interactive's most prestigious division QVC continues to
perform well. QVC shopping network has successfully transformed
itself into a powerful global brand, which may facilitate the
company to boost its revenue in double digits. The strategic move
taken by management to offer QVC programs on mobile platforms, such
as smartphones and tablets, was a huge success. Furthermore, the
company is generating positive free cash flow. We believe Liberty
Interactive is currently fairly valued as the company is undergoing
a process to create Liberty Ventures tracking stock.
Liberty Interactive's QVC division has become the undisputed
market leader in the $8 billion TV home-shopping business.
Currently, QVC commands an estimated 69% market share, far ahead of
its nearest rivals,
ValueVision Media Inc.
). Furthermore, Liberty Interactive also owns a 32% stake of HSN
Inc. TV home-shopping business is characterized as having quite
stable customer base, generally women. QVC accounts for over 11
million customers in the U.S., which is expected to grow in the
Currently, QVC's services are distributed to approximately 195
million homes worldwide. Despite facing devastating earthquake and
tsunami in Japan, resulting in severe disruption of QVC TV shows in
the country, Liberty Interactive managed to retain its sales
momentum in Japan.
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