Even as Sirius XM (SIRI) flirts with bankruptcy and rival DISH Network (DISH) sheds subscribers, Barron's says market-leading satellite-TV provider DirecTV Group (DTV) is "flashing a buy signal."
The company is "defying gravity," as one analyst puts it -- gaining more subscribers and growing earnings. The stock could pop more than 40%, to about $30.
Here's why Barron's is so bullish:
- DTV's $300/season premier sports package, with its winning NFL Sunday Ticket, is a must-have subscription for serious sports fans. DTV leads the industry with 130+ high-definition channels.
- DTV added 301,000 new subscribers during a Q4 in which other companies - and the economy - crumbled. Churn fell to a record low 1.42%.
- DTV replaced DISH in a partnership with AT&T (T), which lessens the risk of it not having a broadband offering, and makes it more likely to keep the Ticket after its deal with the NFL expires in 2010.
- Shares trade not far from 2005 levels, even though DTV increased its market share to 18% from 16%. CEO Chase Carey says shares are "woefully undervalued."
Loomis Sayles analyst Paul Wright thinks DTV will beat consensus EPS estimates in 2009, driving shares ($21) toward $30. "They are executing tremendously." Add to that the possibility of an overture by a telco such as AT&T or Liberty Media Interactive (LINTA) which already owns 53.6%.
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- Though the deadline for the switch to digital TV was delayed by the Obama administration, once it's law it will be a boon for DTV, Investment U says.
- Market Folly notes that $4B hedge fund Maverick Capital recently boosted its stake in DTV by 96.2%.
