DirecTV (NASDAQ:DTV) recently released its Q1 2011 earnings and it seems that the quality of new subscribers remains high, spurring solid adoption of high definition (HD) and digital video recorder (DVR) services. Here we look at the value contribution of these services to DirecTV’s stock. DTV 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).
Our price estimate for DirecTV stands at $50.16, implying a slight premium to the market price.
Subscriber Quality Remains High
DirecTV’s management mentioned that about 80% of gross subscriber additions in Q1 2011 in the U.S. opted for HD, DVR or both. [1] More than 66% of subscribers choosing these advanced services opted for both HD and DVR. [1]
U.S. HD & DVR Represents 17% of DirecTV’s Stock Value
We estimate that about 48% of DirecTV’s U.S. subscribers had access to advanced services like HD and DVR in 2010 and were paying an average monthly fee of a little over $15 per month. We expect the penetration to rise to 66% by the end of our forecast period as the new subscribers continue to opt for these advanced services and existing subscribers upgrade. You can modify the forecast in the interactive chart below to see how change in this figure can impact our price estimate for DirecTV”s stock.
It’s worth noting that the above division only accounts for U.S. subscribers opting for HD/DVR services. While these services are also offered in Latin America, we bundle these within the average fee per subscriber for Latin American region and for modeling purposes.
See our complete analysis for DirecTV’s stock here
Notes:- DirecTV’s earnings transcript for Q1 2011, SeekingAlpha [↩] [↩]
