UPDATE: Citi Downgrades DirecTV On Little Upside

In a report published Friday, Citi Research analyst Jason Bazinet downgraded

from Buy to Neutral and raised the price target from $79.00 to $82.00. Bazinet noted that the bull case was based on fundamentals, but sees little upside on current equity values. The analyst commented, “Even if DirecTV achieves (nearly) $8 in (non-Venezuela) FCF and EPS in 2016 we see the stock gliding to $82 (12.9x FCF) by year-end '14 and $95 (12.3x FCF) by year-end 2015. In effect, our fundamental outlook suggests just 10% upside over the next 12 months. As such, the fundamental bull case on DirecTV has largely played out.” Citi added that the Telco M&A bull case may also be already priced in. Assuming Telco firms pay a 20 percent premium to the closing price $77.60 on April 30, 2014, the stock could be acquired for $93.00. Bazinet remarked that the seven percent risk-arb spread translates to eight percent upside, trading at $87.00. The analyst reported that the equity value could spout higher following a possible merger announcement of the two DBS firms. If the firms merge, a $15.00 or 18 percent upside is likely. Shares of DirecTV closed at $80.76 on Thursday and is currently trading at $79.61, down 1.44 percent.