Dish Network’s Shareholders Have Lost 40% Of Their Value In 3 Years. Here’s Why!

Dish Network (NASDAQ: DISH) saw its stock price drop by almost 40% in the last 3 years, from $60 in February 2017 to about $37 in February 2020. This fall was primarily driven by a drop in revenues and significant decline in the P/E multiple, due to subscriber attrition and lower spectrum valuation. This was partly offset by slightly higher net income margin. View our interactive dashboard analysis What Factors Drove Almost A 40% Decline In Dish Network’s Stock In The Last 3 Years?

A] Revenue Decline

• Dish Network has seen a 15.2% decline in its total revenue over the last 3 years, with revenue decreasing from $15.1 billion in 2016 to $12.8 billion in 2019.
• Total revenue is expected to decline further by 2.7% to $12.5 billion in 2020.
• Lower revenue has been entirely contributed by a decrease in subscriber-related revenues.
• With increasing number of users switching to SVOD (streaming-video on demand) platforms, like Netflix and Amazon, subscriber count has continuously decreased from 13.7 million in 2016 to 12 million in 2019.
• This trend is expected to continue, exacerbated by the launch of Disney+ and Apple TV in 2019, which could put pressure on the already dwindling subscriber base, expected to reach 11.7 million by 2020.
• Additionally, Univision and AT&T’s removal of certain of their channels from Dish Network’s programming line-up, is also expected to drive subscriber count downward.
• This has been slightly offset by higher equipment sales.

For further details please visit our interactive dashboard analysis, Dish Network Revenues, which provides an in depth view of the company’s segment-wise revenue performance and outlook.

B] Rise in Net Income Margin

• Despite an increase in Net Income Margin from 9.9% in 2016 to 10.9% in 2019, the sharp drop in Revenue led to a decrease in Net Income from $1.5 billion in 2016 to $1.4 billion in 2019.
• Total expenses as a % of revenue decreased from 90.9% to 89.1% during this period, which led to an increase in margins.
• Lower expenses were primarily driven by lower effective tax rate following the reduction in statutory tax rates, decrease in subscriber acquisition costs, along with lower depreciation and impairment cost (reflected in other operating expenses).

C] Drop in EPS

• Along with lower net income, an 11.1% increase in share count has led to a fall in EPS from $3.09 in 2016 to $2.60 in 2019.
• We expect the EPS figure to further decrease to $2.10 in 2020.

D] Drop in P/E Multiple

• Dish Network’s P/E multiple declined by 40% from 23.7x in 2016 to 14.2x in 2019.
• Dish’s P/E has contracted significantly, due to pay-TV losses and a potentially lower valuation for the company’s spectrum, which it acquired over the last decade, spending close to $20 billion.
• While Dish held this spectrum as a non-operating asset, in July 2019 the company finally announced plans to enter the wireless market, by acquiring Sprint’s prepaid wireless business, noting that it would eventually build out its own network with its spectrum. The company is required to cover 70% of the U.S. population with 5G by June 2023, offer 5G broadband service to at least 75% of the population in each Partial Economic Area (which are service areas established by the Federal Communications Commission) no later than June 14, 2025.
• The market believes this could be a risky proposition, given Dish’s high debt load and the relatively competitive nature of the wireless industry, which has led to a fall in the company’s stock price in the last 3 years.
• The current P/E is also lower than that for its peers Comcast, Verizon, and Disney.

As per Dish Network Valuation by Trefis, we have a price estimate of $42 per share for Dish Network’s stock.

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