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Will Dish Pursue DirecTV?

Dish Network Corp (NASDAQ:DISH), the nation’s second largest satellite-television provider, is in a shopping mood. Will Dish Network join the likes of AT&T Inc. (NYSE:T) and bid for DirecTV (NASDAQ:DTV)?


Dish Network in the News

Recently, there was buzz about the potential for Dish Network to vie for a chance to purchase its competitor, DirecTV. However, Dish Network Chairman Charlie Ergen set the record straight when he noted, “DirecTV would be too frothy for us, for our board to look at, at those kind of prices.”

On top of the latest television merger debates, Dish Network also reported Q1 results, revealing a 19% drop in income from a year ago to $176 million. Yet, despite this dip in income, Dish Network actually added about 40,000 customers and revenue rose 6.2% to $3.59 billion. Part of the revenue increase was due to the rise in subscription costs, where the average revenue per subscriber amounted to $82.36 vs. $78.44

What Does This Mean For Dish Network Stock

Based on the news that Dish Network will not be pursuing a deal with DirecTV, Pivotal Research analyst Jeffrey Wlodarczak maintained his BUY Dish Network rating with a price target of $74. Wlodarczak noted that Dish Network’s Chairman Ergen knows when to pass on an inopportune deal and maintains his BUY recommendation. Jeffrey is a 1-star ranked analyst, with a -5.7% average return per recommendation.


On the other hand, Merrill Lynch analyst Jessica Reif Cohen reiterated her SELL Dish Network rating and $40 price target. Cohen acknowledged the positive quarter, stating, “DISH reported 1Q results generally meeting-or-exceeding most of projections. Consolidated revenue was $3.59bn, ~+6% y/y, a significant improvement in the growth rate of the core business compared with recent quarters.” However, she also pointed out that, “Stronger EBITDA was helped by better (but still high) subscriber related expenses, a line item which includes programming costs, of $2.1bn (+8.2% y/y). Programming costs included a significant retroactive payment to DIS (we estimate $50mn+).” Despite pointing out some of Dish Network’s positive numbers, Cohen maintains her SELL recommendation. Cohen is a 3-star ranked analyst with a +9.1% average return per recommendation.


Dish Network appears to have had a solid Q1, but is wary of getting in over their head when it comes to a possible DirecTV deal.