On May 23, 2014, we issued an updated research report on
) - the largest U.S. satellite TV operator. The company reported
mixed financial results for the first quarter of 2014 with the
bottom line outpacing the Zacks Consensus Estimate but the top line
DIRECTV has delivered positive earnings surprises in three of the
last four quarters, with an average beat of 8.07%. The
first-quarter results exhibited bottom line strength that can be
attributed to solid subscriber and ARPU growth in the U.S. market.
DIRECTV has considerably improved its subscriber quality - i.e.
shrank the proportion of subscribers with low credit ratings. With
a higher-quality subscriber base, the company has implemented
programming package price increases, and higher HD and DVR
equipment service and lease fees in the U.S. This has led to higher
APRU and margin expansion. Moreover, launch of value-added services
coupled with continuous share buy-back plans are likely to act as
catalysts for the company going forward.
On the flipside, severe competitive threat arising from large
telecom and cable TV operators coupled with availability of
low-cost video streaming companies like
) and Hulu will increase customer churn while moving ahead.
Moreover, rising programming costs, foreign exchange currency risks
and sluggish Latin American operations are near-term concerns for
Unlike other cable and large telecom operators, DIRECTV lacks
triple-pay service offerings which we believe is a drawback of the
company. Meanwhile, the stock price has soared over 56% in the last
year and is currently trading at a 52-week high range.
Currently, DIRECTV carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Other stocks worth considering in this sector include
). EchoStar has a Zacks Rank #1 (Strong Buy) while DigitalGlobe
carries a Zacks Rank #2 (Buy).
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DIGITALGLOBE (DGI): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
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ECHOSTAR CORP (SATS): Free Stock Analysis
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