(Morgan Stanley on TomTom, 12-11-2015 - van Twitter met dank aan Joost Eysink)
1st Take: Live from Barcelona: Strategic value of map getting clearer
Industry View: In-Line
Stock Rating: Overweight
We hosted TomTom CEO Harold Goddijn at our Barcelona TMT conference today, the same day TomTom announced a licensing deal with Uber. The Uber deal raises interesting prospects for TomTom, as it aligns the company with a major global force in shared mobility. We view the short-term financial aspects of the deal as secondary — the key point here is that TomTom is now providing mapping and traffic data to a company that has major ambitions to shake up the mobility industry, including autonomous driving. Given the investment that TomTom is currently making in maps for Highly Automated Driving, we believe there is scope to deepen this relationship over time. This is tots given — Uber has its own initiatives in mapping in order to reduce its longer-term reliance on Google — but we view it as a good starting point for TomTom.
Yes, but how much is it worth? TomTom has not given revenue specifics on the deal, beyond saying that it is multi-year and global. Licensing revenue is +30% YTD to €103m in the first nine months. Growth could slow in 2016e even factoring in the additional deal, though in conjunction with new business wins in Auto, we believe the licensing driven parts of the business can still show very strong momentum in the next 1-2 years, which supports valuation in our view.
Confident on Consumer business. Goddijn stated a hope that the Consumer business would continue this year's growth in 2016. This would be better than our estimate for -4% in 2016, so there is potential upside to consensus here. Overall we forecast 5% revenue growth in 2016. Management also appeared confident on prospects in PND (where declines have slowed markedly), and on sports watches, where TomTom continues to take share. Action cameras are early stage but early signs are encouraging.
Telematics roll-up continues. Management expects strong organic growth to continue in 2016 (growth has been 20%+ in recent years), and there is scope for further small acquisitions here over the next year.