Dish Network Stock More Than Doubles In A Year: Still A Buy?

+108.87%
Upside
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Market
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Trefis
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DISH
DISH Network

We believe Dish Network stock (NASDAQ: DISH) has the potential to provide another 10% returns to its investors. DISH trades at $37 currently and is, in fact, down 6% since the beginning of 2020 when it was at $35. It traded at $41 in February 2020 – just before the coronavirus pandemic hit the world – and is currently almost 10% below that level, as well. Though it is below its pre-Covid levels, DISH stock has more than doubled from its March 2020 lows of $18. This compares favorably to the overall market (S&P 500) which went up 82% during this period. DISH managed to outperform the broader market as it posted better than expected results in Q2, Q3, and Q4 2020, benefiting from Boost Mobile and Ting Mobile acquisitions. The gradual opening up of the economy is expected to lead to recovery in consumer spending in the coming quarters. This will drive the commercial/industrial customers to come back to its fold as the current crisis gradually abates. Additionally, as the company continues on its track of 5G expansion, revenue growth is set to improve in 2021 and 2022, which is likely to drive the stock higher by another 10% despite more than a 100% increase since March 2020. Our conclusion is based on the comparative analysis of Dish Network’s stock performance during the current financial crisis with that during the 2008 recession in our dashboard.

2020 Coronavirus Crisis

Timeline of 2020 Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • Since 3/24/2020: S&P 500 recovers 82% from the lows seen on Mar 23, 2020, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
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In contrast, here is how DISH stock and the broader market fared during the 2007-08 crisis.

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

DISH and S&P 500 Performance Over 2007-08 Financial Crisis

DISH stock crashed from levels of about $38 in September 2007 (pre-crisis peak) to levels of $11 in March 2009 (as the markets bottomed out), implying DISH stock lost more than 70% from its approximate pre-crisis peak. It recovered post the 2008 crisis, to levels of close to $21 in early 2010, rising by 85% between March 2009 and January 2010. In comparison, the S&P 500 Index saw a decline of 51% and recovered 48%.

DISH Fundamentals Over Recent Years

DISH revenues decreased from $14.4 billion in 2017 to $12.8 billion in 2019 due to lower subscriber-related revenues as an increasing number of users are switching to SVOD (streaming-video on demand) platforms, like Netflix and Amazon. However, revenues shot up in 2020 to $15.5 billion, the highest level in recent years, mainly due to two major acquisitions. Despite the overall rise in revenues, margins declined over recent years with EPS decreasing from $4.50 in 2017 to $3.36 in 2020, mainly due to higher cost of services and equipment, along with impairment charges.

Does DISH Have Enough Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?

DISH’s total debt decreased from $15.1 billion in 2017 to $13.6 billion at the end of 2020, while its total cash went up from $2 billion to $3.7 billion over the same period. Also, DISH generated healthy cash from operation of $3.3 billion in the last 12 months, while there was a cash outflow from investments of about $4 billion. Though the debt level still remains high, which remains a risk for the company, it is unlikely to translate into a crisis as the company’s cash balance and cash flow from operations provides it a reasonable amount of liquidity to service that debt.

Conclusion

Phases of Covid-19 Crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment

Despite the recent uptick in the number of new Covid-19 cases in the U.S., we expect continued improvement in demand, further helped by successful vaccine rollout, to buoy market expectations. As investors focus their attention on expected 2021 and 2022 results, we believe DISH Network stock has the potential for modest gains once fears surrounding the Covid outbreak are put to rest. 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 on track, with the company planning to cover around 70% of the US population by mid-2023. As per Dish Network Valuation by Trefis, DISH stock’s fair value works out to $40 per share, reflecting a potential upside of about 10% from its current level.

5G wireless technology is a hot trend. Which stocks should you pick? Check out our theme on 5G Stocks for details.

 

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