NEW YORK (CNN/Money) - TiVo's stock rallied Tuesday after an analyst at First Albany initiated coverage of the company with a 'strong buy' rating, setting a price target of $16.

TiVo (Research) stock jumped about 18 percent after rising as much as 25 percent earlier in the session. The shares closed Monday at $5.60.

The maker of digital video recorders (DVRs) has never had a profitable year. In the latest quarter, the Alviso, Calif.-based company posted a net loss of $33.7 million, equal to 41 cents a share.

In his report, First Albany analyst Richard Baldry cited anticipated solid growth in the sector and TiVo's DVR partnership with Comcast as the main factors behind the rating. He projected that growth in the sector would continue at its current pace of 125 percent a year.

"We believe that TiVo's strategy of subsidizing its hardware to accelerate its growth and solidify its long-term market share is as strong one," Baldry said in his report.

"TiVo has already established itself as the leading vendor in this new, fast-growing consumer electronics category. Rather than viewing TiVo as a new hardware provider, however, we believe that the company's true underlying value is centered around its recurring service model."

More than 3 million U.S. homes currently have TiVo digital recorders, he noted.

For a discussion of wireless and electronic devices in the home, click here.

Baldry owns stock in TiVo. First Albany Capital has no banking relationship with the company.