Is VIZIO Headed for a Breakdown? – August 4, 2021

VIZIO Holding Corp (VZIO) operates two distinct integrated businesses: Device and Platform+. Through Device business, it offers a range of high-performance Smart TVs designed to address specific consumer preferences, as well as a portfolio of soundbars that deliver immersive audio experiences.

The company has been gaining on strong sales of its high-quality Smart TVs and premium soundbars. VZIO also launched numerous successful ad campaigns on America’s top TV networks. This led to the company surpassing 11.2M addressable TVs across the U.S. for its platform business.

The company has a current ratio of 1.4, which indicates it has more than enough liquidity to handle short-term debt. Management is also quite efficient with a return on equity of 30.9%. While sales are expected to rise up 4.1% over the next year, EBITDA is expected to fall 41.9%. VZIO is also reporting earnings today, so keep an eye out for that.

The stock appears overvalued with a trailing P/E of 41.92 and a forward P/E of 51.28. VZIO stock has shown mixed performance since April and has recently been trending downward as shown in the chart below.

Take a look at the 6-month chart of VZIO below with added notations:

After IPOing earlier in the year, VZIO has repeatedly bounced on top of a key level of support at $21 (green). The stock appears to be falling back down to that support again, and another rally could start from there. However, a break of $21 could mean much lower prices for the stock.

If the stock were to break below the support, a trader could enter a short position under $21 with a protective stop placed above the $21 level.

Author: Christian Tharp, CMT