DirecTV (NASDAQ:DTV) recently released its Q1 2011 earnings and based on continued strength in subscriber additions, we have raised our price estimate for the company to $50.16. Below we take a quick look at whether the U.S. subscriber addition momentum will continue. The company competes with other pay-TV service providers like Dish Network (NASDAQ:DISH), Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), AT&T (NYSE:T) and Verizon (NYSE:VZ).
Subscriber Additions Solid in Q1 of 2011
DirecTV added 184,000 net subscribers in the U.S. in Q1 2011, an increase of 84% compared to Q1 2010 figures. [1] This was the third consecutive quarter of year-on-year improvement in subscriber additions. [2] The figures stand substantially higher than Dish Network’s net subscriber additions of about 58,000 and Time Warner Cables video subscriber losses of 65,000. [3] Interestingly, DirecTV’s figure is not too far behind AT&T’s U-Verse subscriber additions of 218,000 in Q1 of 2011. [4]
But Competitive Forces Will Weigh In Future
Nevertheless, we believe that subscriber additions will not continue at this rate. While Dish has not aggressively pursued new subscribers, competition from telcos like AT&T and Verizon remains intense and cable operators are also starting to improve. We recently discussed discussed Time Warner Cable’s efforts to stem video subscriber losses. DirecTV has acknowledged the resulting competitive risks of such initiatives. “We are seeing more aggressive cashback offers, triple play bundle promotions without contractual commitments and lower entry price points,” the company noted. [2]
Our $50.16 price estimate for DirecTV stock implies a slight premium to the market price.
See our complete analysis for DirecTV here.
