Goldman Removes Dish Network From Conviction List

• DISH Network Corp DISH shares are down 15 percent year-to-date, and are trading significantly below their 52-week high of $80.75.
• Goldman Sachs’ Brett Feldman maintained a Buy rating on the company, while reducing the price target from $108 to $77.
• While the view on the intrinsic value of Dish Network spectrum licenses remains intact, Feldman points out that the event path for unlocking the full intrinsic value is unclear.

Analyst Brett Feldman said that there is lack of clarity around “the potential event path for unlocking the full intrinsic value of DISH’s extensive portfolio of spectrum licenses.” He explained that it still remains unclear how and when Dish Network would be able to capture the value of this asset.

The FCC is planning another spectrum auction in early 2016. In view of this, spectrum related deals, including M&A, are unlikely from January through most of 2016. “We therefore believe it is appropriate to take a more conservative view on the degree to which spectrum value may be reflected in DISH’s share price during that period,” Feldman wrote.

The analyst enumerated the key adjustments to the valuation:

1. Shift to a full-taxed spectrum valuation
2. Assigning a lower probability to M&A
3. Assumption that spectrum value will not be realized for at least 2 years

In the report Goldman Sachs noted, “We continue to see evidence that video is going mobile, which we believe will drive demand for spectrum, especially wide-channel, mid-band licenses such as those held by DISH.”

Feldman added that Dish Network has “preserved its strategic options through its AWS-3 settlement with the FCC.” There is significant upside to Dish Network, since the market seems to be valuing the spectrum licenses at nearly a 50 percent discount to intrinsic value.

The company has been removed from Goldman Sachs’ Conviction List and its price target has been lowered due to the “more conservative valuation methodology that modifies the extent to which DISH’s spectrum value can be realized in the stock over the next 12 months.”