We upgrade our recommendation on
Liberty Interactive Corp.
) to Outperform following its robust financial results for the
second quarter of 2012. Both top and bottom lines beat the Zacks
Consensus Estimates. 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 massive
fluctuations in the last couple of years.
The company's prestigious QVC division continues to perform
exceptionally well. The QVC shopping network has successfully
transformed itself into a powerful global brand, which may
facilitate Liberty Interactive to boost its revenue in double
The strategic move taken by management to offer QVC programs on
mobile platforms, such as smartphones and tablets, was a huge
success. Furthermore, Liberty Interactive is continuously
generating positive free cash flow to sustain its future
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
long term. QVC is currently the 8
largest online retailer by revenue in the U.S.
Liberty Interactive is systemetically following a share buy-back
program in order to enhance its shareholders' wealth. In the
previous quarter, Liberty Interactive repurchased approximately
14.7 million Class A shares for a total consideration of $257.4
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