Vizio Makes the Case for Buying Its IPO

Image: Vizio.

Just as the variety of personal screens is growing exponentially, Vizio is hoping to convince investors that there are serious returns to be had investing in cheap televisions.

Bank of America Merrill Lynch, Deutsche Bank Securities, and Citigroup will underwrite the offering, Vizio reported earlier this summer in an S-1 filing with the Securities and Exchange Commission.

Details of the offering, including which exchange will host the stock, are still to come. All we know for now is that Vizio intends to raise up to $172.5 million in proceeds to help expand the business both domestically and overseas. Vizio also raised the possibility of using funds to "acquire or invest in complementary businesses."

What Vizio means by investing in "complementary" businesses isn't entirely clear. For now, Vizio sells sound bars and sound standsin addition to TVs, putting the company in conflict with the likes of Bose andApple's Beats Electronics product line.

How does the company stack up? Bose alone generates close to $3 billion in annual sales of headphones, speakers, and related audio equipment.Beats was generating over $1 billion in revenueat the time of Apple's 2014 acquisition of the company. Vizio didn't break out its audio revenue, choosing instead to highlight its position as leading the market in total sound bar units sold last year.

Regardless, the core business appears to be doing well enough. Despite tough compeititon from Samsung,Sony, and LG,Vizio sold 7.08 million TV units last year, a 13% increase. Audio unit sales improved 79% over the same period. Revenue improved to $3.1 billion in 2014 from $3 billion the year prior. Vizio's retail network includes some 8,000 U.S. stores.

Looking ahead, Vizio is aiming to do more with the data it has on viewing and usage. Roughly 61% of its high-definition televisions are connected to the Internet. Combined, they account for over 8 million "Vizio Connected Units" that feed 100 billion anonymized data points to the company's servers for helping marketers make better advertising decisions.

More broadly, Vizio cites data from IHS Technology that says North American sales of high-definition televisions eclipsed $21.1 billion in 2014, and Smart TVs are expected to become a growing portion of that market. In particular, Vizio cites IHS data that says Smart TVs will account for 49.1% of HD television sales as of 2019, up from 35.8% last year. Total shipments are on track to rise from 15.6 million to 20.5 million over the same period, or 5.6% annualized.

Why should investors care? Not only is that a decent growth rate, but even tough markets have leaders, and Vizio looks like one of the low-cost winners in consumer electronics. Don't write off this IPO until the final S-1 is filed and it's clear how many shares are being offered and at what price.

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Tim Beyers used to be a call screener. Yeah, OK, he still is. He's also a member of theMotley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission and owned shares of Apple at the time of publication. Check out Tim'sweb homeandportfolio holdingsor connect with him onGoogle+,Tumblr, or Twitter, where he goes by@milehighfool.The Motley Fool owns and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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