How Much Could Dish Network Increase Your Wealth?

Dish Network stock (NASDAQ: DISH) has gained almost 78% (vs. about 42% for the S&P 500) from its March 23 lows of this year to reach to its current level of $32. This is after the stock dropped to a low of $18 in late March, as a rapid increase in the number of Covid-19 cases spooked investors, and led to increased fears of an imminent global economic downturn. The stock is currently about 23% below its February 2020 high of $41. Are the gains warranted or are investors getting ahead of themselves? We believe that the stock recovery is justified, and think the stock price is likely to increase further by close to 10%-15% from its current level in the near term, thus increasing shareholder wealth further. Our conclusion is based on our detailed comparison of Dish Network’s stock performance during the current crisis with that during the 2008 recession in our dashboard analysis.

How Did DISH Fare During The 2008 Downturn?

We can see that DISH’s stock declined from levels of around $47 in October 2007 (the pre-crisis peak) to roughly $10 in March 2009 (as the markets bottomed out) – implying a 79% erosion of value from its approximate pre-crisis peak. This marked a drop that was bigger than the broader S&P, which fell by about 51%.

However, DISH’s stock recovered strongly post the 2008 crisis to about $21 in early 2010 – rising by approximately 113% between March 2009 and January 2010, as against the S&P which bounced back by about 48% over the same period.

During the current coronavirus crisis, DISH’s stock lost 56% of its value between 19th February and 23rd March 2020, and has recovered almost 70% since then. In comparison, the S&P fell by about 34% and rebounded by about 41%.

Is The Recovery Warranted & Can We Expect Further Gains?

The ongoing crisis and the resulting lockdowns have led to a slowdown in industrial and economic activity, which has affected consumer spending power, leading to decreased demand for the company’s offerings. This was confirmed in the Q1 2020 results where we saw that the pandemic caused severe disruption in certain commercial segments served by the company including the hospitality and airline industries. The company lost 413,000 net Pay-TV subscribers in the reported quarter compared with 259,000 lost a year ago. Moreover, DISH lost nearly 281,000 net Sling TV subscribers and 132,000 DISH TV subscribers. However, the market seemed to be unfazed with the loss in subscribers during the crisis, as Dish Network’s revenue increased almost 1% due to a 4.4% increase in average revenue per user (ARPU) on y-o-y basis.

However, over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. compared to the rate seen in April-May to boost market expectations. Additionally, the gradual lifting of lock downs is also giving investors confidence that developed markets have put the worst of the pandemic behind them. Following the Fed stimulus — which helped set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view, with investors now mainly focusing their attention on 2021 results.

Currently, investors seem to be buoyed by Dish closing the acquisition of Boost Mobile on 1st July 2020, which officially marks Dish’s entry into the wireless retail market. Additionally, Dish’s ambitious 5G rollout plan seems to be bearing fruit, with Dish announcing that it hopes to get a 5G network core nailed up in at least one US market in 2020. Having invested close to $11 billion directly to acquire certain wireless spectrum licenses and related assets, the company plans to cover around 70% of the US population by mid-2023. Though the stock has recovered at a healthy rate between February and March 2020, with investors’ focus now primarily shifting to 2021 numbers, we believe expectations of revenue and margin growth due to acquisitions and 5G plans are likely to drive the stock higher from its current level of $32. Based on Dish Network’s valuation, Trefis has a fair price estimate of $36 per share for DISH’s stock

So, while DISH seems to have an upside of about 15% from its current level, which S&P 500 component stocks have the best chance of outperforming the benchmark index? Our 5 In the S&P 500 That’ll Beat The Index: TWTR, ISRG, NFLX, NOW, V look promising.

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