DIRECTV (DTV) Banks on Innovative Services for Growth - Analyst Blog

Continuous elimination of low-quality customers, aggressive share repurchase plans and the launch of innovatiove services are likely to benefit DIRECTV (DTV), going ahead. On the other hand, competitive threats in the pay-TV industry, rising programming costs, foreign exchange currency risks and weakness in the company's Latin American operations pose near-term concerns for the company.

DIRECTV has become the first multi-channel video provider to offer 4K Ultra HD programming directly on subscribers' TV sets. The company has launched the service in partnership with Samsung, a leading brand in UHD TVs. DIRECTV customers will now have access to Ultra HD content using a DIRECTV Genie HD DVR and a supporting 2014 Samsung Electronics Ultra HD TV. Through this service, DIRECTV will offer an array of fresh releases, popular movies and nature documentaries in 4K.

On the other hand, for the Latin American region, DIRECTV has adopted a new set of strategies. These include: (1) gradual penetration since the pay-TV market is highly untapped; (2) utilizing favorable macroeconomic and demographic trends with both high-end and low-end cost-effective offerings; and (3) pursuing the next-generation wireless broadband and online on-demand video facilities. DIRECTV has initiated a massive marketing drive to attract customers to its exclusive programming.

The Latin American region has been a major concern for DIRECTV. In the reported quarter, DIRECTV lost 119,000 subscribers in this region against an addition of 260,000 in the year-ago period, mainly due to stringent credit measures and lower promotional schemes. In the Latin American segment, quarterly ARPU stood at $48.88 as against $49.42 in the prior-year quarter. Moreover, average monthly churn rate in the U.S. for the reported quarter was 1.73% compared with 1.61% in the prior-year period.

DIRECTV currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks worth considering in this sector include Liberty Global plc (LBTYA), Comcast Corporation (CMCSA) and Time Warner Inc. (TWX). Liberty Global sports a Zacks Rank #1 (Strong Buy), whereas Comcast and Time Warner hold a Zacks Rank #2 (Buy).

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