DirecTV (NASDAQ:DTV) competes with satellite and cable providers like Dish Network (NASDAQ:DISH), Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC). We estimate that about 60% of the $30 Trefis price for DirecTV’s stock can be attributed to its US Satellite TV business, which excludes advanced services like High-Definition (HD) and Digital Video Recorder (DVR). The value of the satellite TV business and the company’s stock is highly dependent on the fees DirecTV can charge to its customers.
The Fee per DirecTV Satellite Subscriber has come down from about $59 in 2005 to as low as $55 in 2009 primarily as a result of two factors:
(i) Competitive pricing pressure attributable to bundling of services (TV, internet, phone) by cable companies (Comcast, Time Warner Cable) and telcos (AT&T, Verizon)
(ii) Weakening in economy leading to lower prices to attract new and retain existing customers
Unlike the recent declining trend, we forecast a slight fee rise in future as the economy improves and expect DirecTV’s fees to stabilize around $56 per subscriber by end of our forecast period. You can modify our forecast above to see how the Trefis price estimate for DirecTV’s stock would be impacted under the following two scenarios:
(i) Fee per DirecTV Satellite Subscriber increases more than our forecast. This could be as a result of a faster improvement in the economy and greater demand for higher end (premium) TV subscription packages.
(ii) Fee per DirecTV Satellite Subscriber decreases further instead of slight rise as we have forecast. This could be as a result of higher pricing pressure from the bundled services of competitors.
For additional analysis and forecasts, here is our complete model for DirecTV’s stock.
