Markets

DISH Network to be Added on S&P 500: Is the Stock a Buy?

On Mar 7, DISH Network Corp.DISH received a shot in the arm as the S&P Dow Jones Indices issued a statement declaring that the satellite TV operator will be added on the S&P 500 GICS (Global Industry Classification Standard) Cable & Satellite Sub-Industry index effective prior to the open of trade on Monday, Mar 13. As a result of this news, the stock price of DISH Network rallied 5.34% in the aftermarket trade on Nasdaq.

DISH Network will be replacing semiconductor manufacturer Linear Technology Corp. which has been acquired by Analog Devices Inc. ADI in a $14.8 billion cash-and-stock deal. DISH Network currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here . However, we believe the Zacks Rank of the company is likely to witness upward revision following the news.

Positive Factors

DISH Network's effort to diversify business model from being a pure-play satellite-TV operator to an Internet TV operator is encouraging. In fact, the company gained 28,000 pay-TV subscribers in the fourth quarter of 2016, owing to the popularity of its Internet TV service, Sling TV. Further, the flexible cash and liquidity position of the company opens up more avenues for investments.

Meanwhile, launch of Air TV Player also augurs well. In Jan 2017, DISH Network's subsidiary, AirTV launched its latest streaming device, AirTV Player. This 4K Android-based streaming device which supports ultra HD (high definition) is pre-loaded with Netflix Inc. NFLX , Sling TV and YouTube apps and also works with an over-the-air antenna for broadcast TV. Hence, AirTV marks "a single unified" platform for on-demand streaming, Internet TV, and over-the-air (OTA) local channels.

In Feb 2017, DISH Network has entered into an asset-swap agreement with sister company, EchoStar Corp. SATS . Per the deal, DISH Network will obtain EchoStar's hardware and software technology development group, set-top box development and satellite uplink along with fiber-optic backhaul for its transmissions. Moreover, the deal will also transfer the 10% stake held by EchoStar in Sling TV and wireless spectrum licenses covering four markets in the 28 GHz band to DISH Network.

Additionally, DISH Network will continue to market satellite broadband under the brand dishNET to rural customers. This deal will aid both parties to assimilate all the elements required to provide better customer experience while delivering the full DISH and Sling TV experience to the consumers.

DISH Network, the second largest satellite TV operator in the U.S., has created an extensive portfolio of spectrum, the most important component of wireless networks. The company boasts a portfolio of 80 MHz of radio frequencies of different bands which will be utilized to deploy 4G LTE wireless network in top 100 U.S. markets. Several industry analysts have estimated the value of DISH's wireless spectrum at around $50 billion.

Recently, DISH Network's CEO Charlie Ergen has hinted that the company is interested in the potential deal-making to enter into the wireless industry. At the same time, Ergen also stated that DISH Network has a clear plan to build a wireless network on its own. However, entering in the wireless market either separately or in collaboration with any incumbent carrier will further diversify the company's business model.

Price Performance of DISH Network

The past six months have been extremely good for DISH Network's investors. During that period, the stock returned 20.52%, outshining the Zacks categorized Cable TV industry's increase of 9.91%. Nevertheless, cable TV industry is facing massive cord-cutting threat from low-cost online streaming service providers.

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Netflix, Inc. (NFLX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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