DirecTV Updates: CEO Braces for 2012 Slowdown, Still Worth $53.25

In the past couple of weeks, DirecTV’s (NASDAQ:DTV) stock has limped along primarily because of cautious outlook provided by the company. The company has mentioned that it plans to reduce its expenses in 2012 by cutting down on operational costs such as overhead expenses, programming costs and hiring. ^[1] DirecTV is taking a conservative approach to guidance and doing the right thing by warning beforehand that it may see a slowdown in growth due to Europe debt crisis and U.S. Presidential elections. The company has largely been doing better than its counterparts such as Dish Network (NASDAQ:DISH) and Time Warner Cable (NYSE:TWC) in recent months and has produced some attractive return on invested capital historically above peers.

DirecTV’s Q3 2011 results were marked by record subscriber additions as a result of offering free NFL Sunday Ticket package to its customers to lock them up for long-term contracts. Although the NFL currently does not contribute much to DirecTV’s value (see article What an NFL Lockout Would Mean for DirecTV), the company is clearly trying to change that and use it as a tool to prepare for a slower season by accelerating subscriber growth at a time when it can. DirecTV has been doing just right in the U.S. despite a highly competitive and saturated market and absence of bundling of other services such as Internet. In addition to this, its prospects in Latina America remain good.

We stay positive on the stock with our price estimate of $53.25, implying a premium of about 10% to the market price.

See our full analysis for DirecTV

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1. DirecTV Plans to Cut Back on Spending, Hiring in 2012, CEO Says, Bloomberg, Nov 21 2011 [↩]