Source: Trefis Estimates
DirecTV (DTV) recently reported its Q2 earnings. While the earning results were impressive as a whole, they did hint at a possible slowdown in the U.S. market that would impact its business. The company’s net subscriber additions in the U.S. amounted to just 26,000 in Q2, an amount which is significantly lower than that for previous quarter as well as same quarter an year ago.  This was driven by both continued softness in the economy and pressure from competitors such as AT&T (NYSE:T) and Verizon (NYSE:VZ). It looks like telecoms are the biggest threat and other players such as Dish Network (NASDAQ:DISH), Comcast (NASDAQ:CMCSA) and Time Warner Cable (TWC) still have some work to do. Below we take a quick look at how the slowdown may impact DirecTV.
Our price estimate for DirecTV stands at just over $50 implying a premium of about 15% to the market price.
(Chart created by using Trefis' app)
U.S. Debt Crisis Could Impact DirecTV’s ARPU
While it may be the case that due to increasing penetrations of services such as HD and DVR, overall ARPU for DirecTV may grow, the average subscription fee for packages excluding these services may suffer if the debt crisis in the U.S. continues.
Increasing taxes or less confidence in future earnings or job prospects could lead which customers to cut down on their expenditures by having cheaper packages or avoiding Pay-TV altogether. This could also encourage DirecTV to get more competitive on prices and in doing so it could promote lower priced packages.
On the contrary, if DirecTV can hold off against competition, it may still have room to increase prices in future. The company will try to do so by focusing on high quality customers.
- DirecTV’s SEC Filings