DISH

DirecTV Shines in First Quarter; Merger Talk Icing on the Cake

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We profiled pay TV provider DirecTV (DTV) earlier last week (click here), branding it as a Valuentum stock, and the firm’s first-quarter performance, released today, helped to support our view on shares. The company surpassed 38 million total subscribers in the quarter (including Sky Mexico, which is accounted for using the equity method), while adjusted operating profit before depreciation and amortization (OPBDA) advanced 7% on an adjusted basis. The firm’s free cash growth was excellent during the period, jumping 25%, to $886 million. Though traditional free cash flow (cash from operations less capital expenditures) is different than enterprise free cash flow (free cash flow to the firm), they are highly correlated. The strong cash flow performance in the quarter offers … Read more

Highly-Rated Best Ideas Portfolio Holding DirecTV Catches a Bid

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At Valuentum, we think companies that are attractive from a variety of different investment perspectives–whether it be growth, value, income, momentum, etc.–have the greatest probability of capital appreciation and relative outperformance. By definition, these stocks, which we call Valuentum stocks, have strong valuation and pricing support coupled with solid revenue/earnings expansion potential and, where applicable, strong dividend growth prospects. We accept the technical market dynamic that the more deep-pocketed institutional investors that are interested in a stock for reasons based on their respective investment mandates (or preferences), the more likely it will be bought and the more likely the price will move higher to converge to its true cash-flow-derived intrinsic value (the action of buying a stock pushes its price … Read more

Dish Network May Finally Tie the Knot with DirecTV

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Though this shouldn’t have come as a surprise to Valuentum members, Bloomberg has reported that Dish Network’s (DISH) CEO Charlie Ergen has approached DirecTV’s (DTV) CEO Mike White about a merger. We have held DirecTV in the Best Ideas portfolio for some time, and here’s what we wrote just over a month ago on February 20: Competition continues to heat up, and Comcast’s (CMCSA) decision to merge with Time Warner Cable (TWC) creates a larger, formidable foe (see details here). However, it also increases the likelihood of a long-anticipated DirecTV-Dish Network tie-up. Though we acknowledge the risks related to a fast-changing industry landscape, our primary thesis on DirecTV is valuation-based. At the time of this writing, we think shares are … Read more

DirecTV Posts Better-Than-Expected Fourth-Quarter Results

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Best Ideas portfolio holding DirecTV (DTV) released better-than-expected fourth-quarter results Thursday. Revenue in the quarter advanced 7%, while operating profit before depreciation and amortization (OPBDA) jumped 6%. Though we would prefer to see profits advance at a faster pace than revenue, both the top-line and bottom-line numbers beat the consensus forecast. The firm’s $1.53 per share in earnings during the period was an impressive $0.24 better than the consensus forecast, largely contributing to the strong stock price performance after the release. For all of 2013, DirecTV hauled in $2.61 billion of free cash flow, about 8.2% of revenue and a 14% increase from the same period a year ago. We liked the better-than-expected performance and strong cash-flow generation and have … Read more

Quiet Trading This Week

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If you haven’t yet read Part I of our Best Ideas piece, you can find it here. The holiday week was very quiet, as expected. However, a few news items did hit the wires that we’d like you to be aware of. First, we received word from ChannelAdvisor, a leading cloud-based e-commerce solutions provider, that same-store sales momentum across the e-commerce spectrum may have slowed in the third week of December. This runs counter to the strong data we’ve been receiving from the space through most of the holiday season. However, we believe the recent news release is something we’d categorize as “noise” (immaterial), especially given the significant date-shifting performed in the representation of the data. ChannelAdvisor had the following … Read more

Merger Rumors Helping Best Ideas Portfolio Holdings

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On Friday, rumors of Dish Network (DISH) and DirecTV (DTV) tying the knot sent shares of both firms higher during the trading session. The potential tie-up is nothing new; we had profiled the potential deal in March this year, but the re-hashing of the idea has some market participants excited. The anti-trust hurdles will be significant for this deal to happen, but it looks like the Department of Justice is warming up to allowing consolidation if recent progress of the merger between AMR Corp (AAMRQ) and US Airways (LCC) is any indication. We love the increased leverage over content creators, the significant cost savings, and the additional financial flexibility that a Dish Network/DirecTV merger would bring. We would expect the … Read more

What’s Going on in the Time Warner-CBS Battle?

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A few weeks ago, CBS (click ticker for report: ) and Time Warner Cable (click ticker for report: ) took their disagreement over carriage fees to another level, as both firms’ existing carriage fee agreement expired, effectively blacking out Time Warner subscribers from viewing the network. Since then, we’ve seen really no signs of the companies coming to any sort of agreement. The Federal Communications Commission (FCC) warned on August 9 that, if the two firms didn’t reach an agreement, the government could get involved and force a resolution. Such an event would be an incremental negative to CBS because we doubt the FCC would see a reason why consumers should be forced to pay more for a network they … Read more

DirecTV’s “Miss” Mostly a Currency Issue

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Best Ideas Newsletter portfolio holding DirecTV (click ticker for report: ) reported strong second quarter results Thursday morning. Revenue increased 7% year-over-year to $7.7 billion, just a bit shy of consensus expectations. The disappointment in the period came from DirecTV Latin America, where revenue still advanced 12% year-over-year on a reported basis (constant currency revenue surged 26% year-over-year). Currency issues can be short-term headwinds, but we think the issues will even out in the long run. Earnings per share increased 8% year-over-year to $1.18, falling well short of consensus estimates. Again, we think this was largely due to currency issues. Free cash flow increased 15% year-over-year to $1.2 billion, equal to 15% of total revenues. In the US, revenue increased 5% … Read more

AT&T Tries Again…This Time: Leap Wireless

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Through the course of the past two years, we’ve seen a trend toward consolidation in the US wireless industry. AT&T (click ticker for report: ) failed to purchase T-Mobile (TMUS) in late 2011, but the firm has taken another stab at gobbling up spectrum and customers, announcing its intention to acquire Leap Wireless (LEAP) Friday for $1.2 billion plus the assumption of Leap’s net debt of approximately $2.8 billion. The deal works out to $15 per share, but AT&T will sell Leap’s Chicago spectrum with the proceeds going to Leap shareholders, which investors are pegging at $2+ per share of additional value. After regulators squashed AT&T’s purchase of T-Mobile, T-Mobile USA merged with MetroPCS. Not long after, Sprint (click ticker … Read more

Dish Won’t Go to War Over Clearwire; What’s Next?

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Late on Wednesday afternoon, news hit the tape that Dish Network (click ticker for report: ) would end its pursuit for Clearwire (CLWR), paving the way for Sprint (click ticker for report: ) to assume full control of the company for $5 per share (in line with our fair value estimate). Although we thought as well as the market thought (since shares of Clearwire were trading above the Sprint buyout price prior to the withdrawal) that Dish Chairman and founder Charlie Ergen would make a higher offer for Clearwire, Ergen may have known a bit more than he led onto during the bidding process, given that the FCC just approved draft rules for the auction of additional spectrum one day … Read more