Barclays Upgrades DISH Network As Risk/Reward Is 'Better 'Balanced'

• DISH Network Corp DISH shares have lost 31 percent since November 16.
• Barclays’ Kannan Venkateshwar upgraded the rating for the company from Underweight to Equal-weight, while reducing the price target from $62 to $59.
• Following the underperformance of the company’s stock in 2015, the risk reward appears better balanced, Venkateshwar stated.

DISH Network’s stock underperformed the SPX by about 34 percent over 2015. The upgrade in rating reflects the risk/reward being better balanced, analyst Kannan Venkateshwar said.

At the current levels, DISH Network’s embedded spectrum is implicitly valued at around $0.68/MHz POP, Venkateshwar mentioned. He added that this is being more fairly valued than it had been at any point in 2015 “as an option on various strategic choices rather than a determinate high value outcome of a sale.”

“Just like any other illiquid asset, the value of spectrum is likely to be determined not by its theoretical worth but the ability and willingness of buyers to pay for it and/or Dish's ability to create a cash flow stream around it,” the analyst wrote.

While there continues to be limited visibility on the monetization of DISH Network’s spectrum, at the current levels, “even sub optimal choices” may lend upside to the company’s stock.

“At present levels, with the core business implicitly trading at zero equity value, investment in DISH is effectively an investment in a range of outcomes with respect to spectrum value,” Venkateshwar commented. He added that the price target assumes 5.5x EBITDA for the core business and an average of about $1/MHz POP spectrum value across all sale scenarios.