The biggest American satellite pay-TV service provider DirecTV (NASDAQ:DTV) will be reporting its Q4 and full year 2011 results on 16th Feb 2012. Will the company continue with its stellar performance and report another great quarter in terms of subscriber additions, or will it feel the impact of its competitors making more efforts to in the business? We think the result may lie somewhere closer to the latter. Its cable competitor Time Warner Cable (NYSE:TWC) has reported continued subscriber losses while rival Dish Network (NASDAQ:DISH) has yet to report its earnings. The latter’s result influence DirecTV’s performance to a greater degree compared to others. Here are couple of things to watch out for.
Dish Network’s Efforts May Impact DirecTV’s Results
Although Dish Network has had a rather disappointing year, its efforts towards the last quarter could mean that the Dish’s subscriber trends might have been better in Q4 and that directly implies slowdown in subscriber additions for DirecTV. Dish Network introduced Blockbuster streaming and DVD service to its customers which saw some encouraging subscriber additions. This step, in tandem with improved focus on higher quality subscribers, could lead to reduced churn for Dish Network and consequently, fewer subscriber disconnections. This could also mean higher gross additions and thus, net subscriber additions for Dish are likely to be better in Q4 2011.
If that’s the case, DirecTV’s Q4 additions can slow and turn out to be below expectations for many investors.
Updated View On 2012
DirecTV has previously mentioned that it plans to reduce its expenses in 2012 by cutting down on operational costs such as overhead expenses, programming costs and hiring. The company believes that it may see a slowdown in growth due to Europe debt crisis and U.S. Presidential elections.
Some other companies such as automakers and media companies expect growth in 2012 and have a relatively more sanguine view. Investors should keep an eye on any updated guidance from the company concerning growth in 2012 as this can impact the stock movement and Q1 2012 results.
We also expect that DirecTV will showcase continued fast paced growth in Latin America and the impact of new law that is aimed at spurring the growth of competition will have minimal impact on Q4 results. However, going forward this can play a role in slowing DirecTV’s subscriber additions in Latin America.
Our price estimate for DirecTV stands at $53.26, implying a premium of over 15%.