CASPER
New member
Challenges Ahead for DBS
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In a note released Monday, Craig Moffett of Bernstein Research suggested to those closely watching the satellite TV business that "there are better opportunities elsewhere" and recommended "remaining on the sidelines."
The analyst maintained his "market perform" ratings for both DIRECTV and DISH Network. Moffett lowered the 12-month target price to $23 (from $26) for DIRECTV and to $14 (from $19) for DISH.
In his note, Moffett pointed out that DISH has recently experienced zero subscriber growth, and the loss of the AT&T distribution relationship "makes next year's prospects for a return to positive subscriber growth bleak indeed." DIRECTV has maintained positive subscriber growth, primarily by taking market share from DISH, but the company "too has seen steep declines in sub growth," Moffett said.
As for the economy, Moffett said a major consumer recession would impact the companies, "although the satellite operators will likely feel the impact far less than most. Revenues at DIRECTV and DISH Network are overwhelmingly recurring, fixed price, and non-discretionary," he said.
Nonetheless, a weaker economy could impact DBS with higher churn rates, resulting in slightly reduced subscriber growth, lower ARPU growth, and lower capital spending (lower SAC and lower retention marketing) as take rates for HDTV and DVRs slow, Moffett said.
Of the two companies, Moffett said DIRECTV appears to be less risky given its higher-end customer base and stronger management. DISH is subject to significant risk due to its ongoing litigation with TiVo.
"DIRECTV also offers the lowest upside to our target price of any company in our coverage universe, across the telcos as well as cable and satellite," Moffett said. "Conversely, DISH Network is the riskier of the two, but offers significantly higher potential upside to fair value."
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In a note released Monday, Craig Moffett of Bernstein Research suggested to those closely watching the satellite TV business that "there are better opportunities elsewhere" and recommended "remaining on the sidelines."
The analyst maintained his "market perform" ratings for both DIRECTV and DISH Network. Moffett lowered the 12-month target price to $23 (from $26) for DIRECTV and to $14 (from $19) for DISH.
In his note, Moffett pointed out that DISH has recently experienced zero subscriber growth, and the loss of the AT&T distribution relationship "makes next year's prospects for a return to positive subscriber growth bleak indeed." DIRECTV has maintained positive subscriber growth, primarily by taking market share from DISH, but the company "too has seen steep declines in sub growth," Moffett said.
As for the economy, Moffett said a major consumer recession would impact the companies, "although the satellite operators will likely feel the impact far less than most. Revenues at DIRECTV and DISH Network are overwhelmingly recurring, fixed price, and non-discretionary," he said.
Nonetheless, a weaker economy could impact DBS with higher churn rates, resulting in slightly reduced subscriber growth, lower ARPU growth, and lower capital spending (lower SAC and lower retention marketing) as take rates for HDTV and DVRs slow, Moffett said.
Of the two companies, Moffett said DIRECTV appears to be less risky given its higher-end customer base and stronger management. DISH is subject to significant risk due to its ongoing litigation with TiVo.
"DIRECTV also offers the lowest upside to our target price of any company in our coverage universe, across the telcos as well as cable and satellite," Moffett said. "Conversely, DISH Network is the riskier of the two, but offers significantly higher potential upside to fair value."
