Guggenheim: Meaningful Upside In Dish Shares Exists For Long-Term Investors

Notwithstanding the video headwinds faced by the cable and satellite services sector, an analyst at Guggenheim Securities is largely positive on the basis of the demand for broadband connectivity, faster speeds and new wireless products.

The Analyst

Analyst Mike McCormack assumed coverage of DISH Network Corp DISH with a Buy rating and $50 price target, suggesting roughly 58-percent upside from current levels.

The Thesis

The industry is exposed to themes such as "cord cutting/shaving, password sharing/stealing, significant broadband growth, nascent wireless broadband threats, commercial opportunities and a new wireless opportunity," McCormack said in a Tuesday note. (See his track record here.) 

The company focus is shifting away from bundles to connectivity as cable companies shy from fighting for lower-margin legacy linear video service revenue, the analyst said. 

Dish offers both satellite-delivered linear TV as well as the Sling TV, the first OTT offering launched in the U.S., he said. 

Since the company does not have a significant broadband offering, it is unlikely to counter the losses stemming from linear video offering by an increase in broadband subscribers and ARPU, McCormack said. 

That said, the analyst sees the significant spectrum assets owned by Dish as being underappreciated.

" ... A sale of some DISH spectrum, which investors have become decidedly more negative on, we believe could reduce leverage in a very meaningful way." 

McCormack expects DISH's cash flow to support continued debt reduction.

"We see many potential positive outcomes, and do not expect a go-it-alone macro network build to ensue, allowing for meaningful upside potential for the shares for investors willing to take a longer-term view."

The Price Action

Dish shares have lost about 34 percent year-to-date. The stock was up 1.35 percent at $32.20 at the time of publication Wednesday. 

Related Links:

Imperial Capital Says CBS Is 'The Cleanest Name In The Space,' Viacom A 'Value Trap'

5 Reasons Why Comcast Is Fighting Disney For Fox

Photo courtesy of Dish Network.