On Tuesday, The Wall Street Journal published reports stating that Walmart was engaged in talks about potentially acquiring Vizio Holding Corp. (VZIO:NYSE), noted Roth MKM analysts Scott Searle and Bill Kirk in a February 14 research note.
The rumored amount for this acquisition would be over US$2 billion, which the analysts do not view as unreasonable.
"From a valuation perspective, commentary around a US$2 billion valuation translates to US$12+ EV/share," they wrote.
Following the circulation of these reports, Vizio's stock price increased by around 25% yesterday evening.
The analysts noted while this acquisition may not be obvious on the surface that, Walmart and Sam's Club (a division of Walmart) currently make up 45% of sales for Vizio, and Vizio could easily become a component of Walmart's white label oon.
The report noted that Walmart has been prioritizing the development of its omni-channel ecosystem. A key part of this strategy has been growing Walmart's third-party online marketplace, which now offers over 500 million different stock-keeping units (SKUs) for sale.
Vizio's Smartcast is the shining star of the company, the analysts reported. "In the Sept quarter, Smartcast was running at a $600M annual run rate (79% ad-driven in 3Q23), with 60%+ GMs and the sole drive of positive adj EBITDA," they wrote. They also pointed out that Vizio's current licensing strategy with Smartcast would most likely not be affected by this acquisition.
However, they pointed out that while speculation has occurred these discussions could be related to Vizio being in discussion with Walmart to include Smartcast in onn TVs.
Overall, the analysts gave the company a Buy rating and a US$12 target price.
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Disclosures for Roth MKM, Vizio Holding Corp., February 14, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: The price target and rating history for Walmart Inc. prior to February 1, 2023 reflect MKM’s published opinion prior to the acquisition of MKM Partners, LLC by Roth Capital Partners, LLC. ROTH makes a market in shares of VIZIO Holding Corp. and as such, buys and sells from customers on a principal basis.
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