DISH Network Downgraded To Sell: Wunderlich Sees Deteriorating Sling TV, Satellite Markets

Wunderlich’s Matthew Harrigan believes the 3 percent rally in DISH Network Corp DISH on July 21 was unwarranted, “given the 381K overall video customer loss, with clear satellite deterioration and Sling TV in our view losing its opportunity to breakout prior to the arrival of new entrants.”

Harrigan downgraded the rating on the company from Hold to Sell, with a price target of $48.

Key Concerns

The analyst mentioned that the weakness in DISH Network’s video core business could adversely impact the company’s negotiating position while working to monetize spectrum.

Related Link: Investors Greet DISH Network Q2 Results

Although improvement is expected from the 281K Q2 video customer loss, Harrigan expressed doubts that the company’s emphasis on higher ROI customers would be able to negate the perception that DISH Network could face meaningful deterioration in its video business tail value.

“This also undermines debt capacity for acquiring further spectrum, including in the current 600MHz auction,” the analyst explained.

Customer Retention Concerns

In addition, Harrigan pointed out that competing OTT entrants had large customer funnel and that the absence of a captive marketing base could prove to be a major hurdle for DISH Network.

“Lower gross customer activity temporarily raises EBITDA, but a gradually deteriorating customer installed base compromises end value,” the analyst stated, while adding, “We value the satellite and Sling businesses in aggregate with a negative 2.5 percent terminal growth rate, and do not even have complete confidence that Sling can attain the 10 percent video top-line contribution that we model for 2020.

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