What Is Driving Our $40 Price Estimate For Dish Network?

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DISH Network

Dish Network (NASDAQ:DISH) is the fourth largest Pay TV provider in the U.S. behind Comcast, DirectTV, and Charter Communications. The company offers Pay-TV services under the DISH and Sling brand. For most of the 2000s, Pay-TV service providers have been struggling with subscriber losses driven by cord cutting and the increasing popularity of over-the-top (OTT) streaming services from companies such as Netflix (NASDAQ:NFLX), Amazon (NASDAQ: AMZN) and Hulu. Consequently, Dish Network saw its subscribers decline from 14.1 million in 2013 to 13.2 million in 2017. While the entire Pay TV domain is suffering, the impact on Dish has been significant, which is evident from the fact that the company has been unable to sustain its subscriber base despite a positive contribution from its streaming service Sling TV.

We have a $40 price estimate for Netflix, which is about 10% ahead of the current market price. Our interactive dashboard details our forecasts and estimates for the company, which we outline below.

Overview Of Estimates

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We expect Dish Network to generate over $14 billion in revenues in 2018, and earnings of about $1.8 billion. Our revenue forecast of about $14.1 billion represents a modest year-on-year decline. Of the total expected revenues in 2018, we estimate $14 billion from the subscription-related business and over $100 million from equipment sales. In 2017, Dish Network lost approximately 284,000 net Pay-TV subscribers compared to the loss of approximately 392,000 net Pay-TV subscribers during the same period in 2016. We forecast the company’s total subscribers to continue to decline to around 12.9 million, with an average monthly fee per subscriber of around $91, translating into $14 billion in subscription-related revenues in 2018.

Dish Network saw its stock decline more than 20% in 2017, and is now down nearly 30% year-to-date as of March 27. We expect the company to continue to see subscriber losses for 2018 which, coupled with pressure on average revenue per user (ARPU), will negatively impact Dish’s revenues in 2018. However, the company continues to offer “skinny bundles” to lure customers back to its Pay TV services through Sling TV, which could offset some of the secular pressure. Our valuation dashboard suggests that Dish Network’s valuation still has some upside, and we expect the company to grow at a similar rate as 2017 going forward.

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