Vizio's IPO Disappoints: Streaming Losing Wall St Luster?

Vizio, the smart-TV maker that’s also pushing to be a dominant advertising platform, experienced disappointing response to its initial public offering on Thursday.

Vizio Holding Corp., which started trading on the New York Stock Exchange under the symbol “VZIO,” priced 12.25 million shares at $21 each. That was at the low end of its range, valuing the company at about $3.9 billion, reports CNBC. Shares closed at $19.10, or down 9%.

Some speculate that the performance might signal that the IPO market — or at least companies dependent for growth on the intensely competitive and potentially margin-challenged streaming business — may be starting to lose some mojo.

Whereas a focus on streaming has been highly valued by Wall St. for some time, some analysts now view the upside as having been “priced in.” ViacomCBS and Discovery Inc. have both seen stock price declines in recent days, and AMC Networks’ price has been down since mid-March.



Bargained-priced TVs, along with sound bars, still generate the lion’s share of Vizio’s revenues, but their growth rate has slowed as TV prices have become more competitive.

Last year, the company’s device sales rose 7%, to account for $1.9 billion of total revenues of $2.04 billion (up from $1.77 billion in 2019).

Vizio has made it clear that it expects most of its growth going forward to come from its Platform Plus business, which is advertising-driven and includes its Inscape data unit as well as its SmartCast streaming system.

Vizio generates revenue from advertising on its home screen and inside some free content, as well as a portion of streaming service subscriptions generated on SmartCast TVs.

Through Vizio Ads, launched in December 2019, advertisers and agencies can buy premium TV ad inventory across the SmartCast platform, including within the launch and discovery environment, partner OTT apps, and on Vizio’s “WatchFree” service.

The company, which uses data from Inscape as well as user data to target ads, has been a leader in addressable advertising --spearheading the Project OAR addressability consortium and moving to have Nielsen (which is using OAR's open addressable standard) measure its advertising.

Platform Plus saw revenue jump from $63 million in 2019 to $147 million last year, and gross profits rise from $40.1 million to $111.9 million. Device profits rose from $125 million to $184.5 million.

“Streaming accounted for just 7.2% of total revenue but because it comes with software margins it made up 38% of gross profit, enabling the company to quadruple its net income for the year to $102.5 million,” reports CNBC.

“We believe that Platform Plus will be the key driver of our future margin growth and financial performance,” Vizio stated in its IPO filing.

SmartCast accounts increased 61%, to 12.2 million, in 2020.

Vizio has a big challenge ahead as it takes on deep-pocketed tech companies. Not only does it have to continue competing with Samsung and LG in selling TVs directly to consumers, but it also has to convince users to stick with its streaming software rather than plugging in a product like a Roku stick or a device from Amazon or Google.

Vizio CEO William Wang told CNBC that investors are asking more questions about Vizio’s ability to compete with streaming companies than with TV makers, but said that Vizio’s ability to integrate its TVs and operating system represents a competitive advantage by enabling superior picture quality and navigation.

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