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- DTV is not suitable for either Defensive Investors or Enterprising Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 4.56% earnings growth over the next 7-10 years, which falls well below the rate the company has seen in recent years.
- The extension of the NFL Sunday Ticket removes the major hurdle to the acquisition of DirecTV by AT&T.
- The collar price of the offering reduces the prime impact up to the closing day.
- At this point, investors have limited downside and solid upside with a price target of $95 on closing of the deal.
- Univision, a Hispanic media supplier, has agreed with DirecTV (DTV) to supply its services to the satellite operator once it launches its internet delivered service.
- The services includes rights to Univision’s broadcast network, 2 local stations, cable channel Galavision. The service being provided by DirecTV is to be called YaVeo.
- There are a growing number of companies that are signing deals for similar online channels.
- The leading satellite television provider could increase its earnings targets following its pending merger with AT&T.
- DirecTV has reported some very strong results in the previous quarter, with earnings per share up by 35%.
DirecTV's Latin America Operations See Subscriber Growth, But Declining Currencies Stall ARPU GrowthTrefis • Tue, Sep. 16
- DirecTV, one of the largest pay-TV operators in Latin America with more than 12 million subscribers, has been growing at an average rate of 25% annually over the past few years.
- While the company has been consistently growing its subscriber base, depreciating regional currencies has stalled ARPU growth over the past few quarters.
- Given the currency trends in the region, we expect ARPU to continue to decline in the near term and stabilize in the medium to long run.
AT&T And DirecTV Merger Under Scrutiny - How Will It Affect Shareholders?
- Investigation is being carried out to cover the merger between AT&T and DirecTV on grounds that it will damage public interest by lowering competition.
- AT&T reported an increase in consolidated revenues of 1.6% which amounted to $32.6 billion in its second quarter results.
- The future guidance for the company is an increase in consolidated revenues by 5%, stable consolidated margins, and adjusted earnings per share at the low end of mid-single digit range.
- With all these concerns, investment doesn't seem like a good idea at this moment in the company.
- The yield on cost of AT&T obtained by purchasing DirecTV at current price levels is very favorable.
- AT&T has not participated in the broad-based market rise over the past few years and can be considered undervalued.
- DirecTV and AT&T have made positive strides including a major negotiating point in the buyout terms.
- Paulson & Co has taken a large stake in DirecTV while Berkshire has reduced its stake.
- AT&T has agreed to buy DirecTV for $95 per share but regulatory approval remains uncertain.
- I believe Paulson & Co's move to buy is more important than Berkshire's sale.
Here's Why AT&T Isn't Destined For Success With DirecTV
- AT&T offered to buy DirecTV after the stock rallied strong.
- DirecTV growth isn't the panacea projected.
- Bundled offerings aren't guaranteed to attract customers.
- DirecTV delivered again very good quarterly results, but the stock hasn't moved.
- The price reflects the fear that the AT&T merger might not be completed due to a potential exclusivity loss of the NFL Sunday Ticket or because of regulatory concerns.
- As I believe that the company will do fine even without merging, I consider the shares to be attractively priced.
- We pitch two companies from the broadcasting and cable TV sector, Comcast and DIRECTV, against one another in the latest instalment of our Head-To-Head series.
- The article focuses on the relative strengths and weaknesses of Comcast and DIRECTV based on business performance and sustainability/dividends/forecasts.
- It ends with discussion of the current valuations of the two companies, and details whether Comcast represents good relative value at current price levels.
DirecTV: Strategic Initiatives And Expansion Plans Key Factors In Earning A Bullish ThesisEquity Watch • Tue, Jul. 15
- Company’s strategic initiatives in the U.S. and infrastructure development and expansion in Latin America portend well for future performance.
- Increasing pay-TV penetration in Latin America will benefit DTV.
- DTV’s expense management efforts will remain important for margins and EPS growth.
U-verse Is The Regulatory Key To The Proposed AT&T/DirecTV Merger
- For the AT&T/DIRECTV merger to succeed, it likely will need to offer significant evidence that it will not slow its investment in new broadband deployment, particularly U-verse.
- AT&T is emphasizing its potential savings on programming savings.
- But regulators’ eyes are going to be on the potential CapX savings that could slow the country’s broadband deployment.
Should Investors Worry About The AT&T-DirecTV Deal?
- AT&T has made a $48.5 billion acquisition proposal to DirecTV.
- The move will help AT&T strengthen its bundled services and compete with Comcast.
- The proposed deal needs to receive a go-head signal from the FCC and the Department of Justice. The regulators are skeptical about big deals as they threat competition.
- 3 risks to the AT&T/DirecTV deal are: 1) acquisition is blocked, 2) NFL deal falls through, 3) AT&T stock drops.
- Environment appears to favor the deal. AT&T's stable stock price is a positive.
- Assuming deal goes through then an investor could make money going long the stock alone or with some puts on AT&T for protection.
- The combined entity will increase AT&T cash flow which should lead to a higher dividend.
- The "New AT&T" would become my largest holding which I am not comfortable with.
- I am looking to replace DIRECTV with another company that generates a large amount of free cash flow.
- DirecTV’s stock has been increasing since news relating to an acquisition by AT&T started flowing in around the end of April 2014.
- AT&T confirmed on May 18th, 2014 that it has reached an agreement with DirecTV to buy DirecTV for $95 per share and also assume DirecTV’s $18.6 billion net debt.
- The acquisition deal presents upside for DirecTV shareholders but offers a mix of negatives and positives for AT&T.
AT&T-DirecTV Deal Could Provide Financial, Strategic Benefits If Approved
- The deal will provide AT&T an opportunity to rapidly expand TV services along with its wireless and broadband services.
- In addition to the strategic benefits, AT&T was likely drawn to DirecTV's significant cash flows.
- The deal also is expected to help AT&T enter into lucrative markets in Latin America, where DirecTV is the leading pay-TV provider with over 18 million subscribers.
- Incremental cash flow from acquisition of DTV gives T more financial firepower in an industry where network investment has differentiated winners from losers.
- Increased scale gives combined company more leverage in negotiations with content providers.
- Deal approval faces fewer regulatory hurdles than expected with consolidation within U.S. wireless space.
- AT&T is a good buy on pullbacks for conservative investors seeking a steady income stream.
AT&T's DirecTV Acquisition: The Cons Outweigh The Pros
- AT&T has agreed to acquire DTV in a deal worth $67b, including DTV's debt.
- Expect immediate earnings and FCF contribution, enhanced broadband speed and cross-selling opportunities.
- DISH would have been a better alternative target given its spectrum assets.
Mon, May. 19, 1:56 AM
- AT&T (T) intends to sell its $6B, 8.4% holding in América Móvil (AMX) in order to avoid conflicts of interest from its proposed $48.5B acquisition of DirecTV (DTV) and "facilitate the regulatory approval process in Latin America."
- AT&T's representatives on América Móvil's board are set to resign.
- The deal will give AT&T a large presence in a region in which DirecTV has 18M customers, making it one of the largest pay-TV operators in Central and South America - along with América Móvil.
Sun, May. 18, 5:14 PM
- As anticipated, AT&T (T) confirms it's acquiring DirecTV (DTV) in a stock-and-cash deal amounting to $95/share ($28.50/share in cash), just short of $50B total.
- Both boards were unanimous in approving the transaction. The companies say it's accretive within 12 months after close, on free cash flow per share and adjusted EPS basis, and that they expect the deal will "pass muster" with regulators.
- Previous coverage
Sat, May. 17, 9:09 PM
- Bloomberg reports AT&T (T) aims to announce a DirecTV (DTV) deal by Monday. BuzzFeed reports AT&T is on track to make an announcement by Sunday. "The deal is done," says a source.
- Past reports put the deal's price around $50B; DirecTV closed with a market cap of $44B on Friday. The company also has a $20.8B debt load that needs to be accounted for, partly offset by $3B in cash and $2B in investments.
- Buying DirecTV would give AT&T 20.3M U.S. subs and 11.9M Latin American subs, plus a 41% stake in Mexican satellite TV provider Sky Mexico (6.1M subs) and access to the NFL's Sunday Ticket package.
- Though not cheap, the deal might make it easier for AT&T to keep supporting its hefty dividend (current yield of 5%). Oppenheimer thinks a 50/50 cash/stock deal at $100/share would lead AT&T to pay out only 55% of its 2016 free cash flow through dividends vs. 65% otherwise.
- More on AT&T/DirecTV
Wed, May. 14, 9:06 AM
- Oppenheimer says there is a "strong possibility" AT&T (T) will pull the trigger on a $100 bid for DirecTV (DTV).
- After crunching the numbers, the investment firm says a DirecTV integration would be accretive to AT&T's free cash flow per share by at least 7%.
- Though there has been a lot of talk from analysts about AT&T being able to increase its average monthly revenue per user through a DirecTV purchase, others note the real value could be on the content negotiation side where a DTV-T combination yields considerable leverage.
- DTV +0.3% premarket to $86.35.
Tue, May. 13, 11:00 AM
- Bloomberg and WSJ reports suggesting AT&T (T -1.3%) is close to a mega-deal for DirecTV (DTV +0.7%) (possibly worth over $66B after factoring net debt) are leading investors to bet Ma Bell won't be interested in making a bid for Vodafone (VOD -2.2%), something the company has been frequently rumored to be interested in exploring.
- AT&T CEO Randall Stephenson has already said "the window may be closing" on acquiring European assets, and has suggested he isn't thrilled with Vodafone's efforts to grow its wireline footprint via M&A.
- For his part, Vodafone CEO Vittorio Colao has hinted he's open to a deal, but has also made it clear his company will continue its wireline expansion strategy in the interim.
- AT&T, which didn't sell off following prior DirecTV reports, is off moderately today, as the Street expresses some concern over the potential $100/share price tag mentioned in Bloomberg's report.
- DirecTV (DTV +0.7%), meanwhile, has pared its AH gains and is now only trading near $88. Worries about regulatory approval might be playing a role; a Bloomberg source states AT&T and DirecTV are expecting a 12-month regulatory process for the deal.
Mon, May. 12, 5:49 PM
Mon, May. 12, 5:10 PM
- Bloomberg reports AT&T (T) is in "advanced talks" to acquire DirecTV (DTV) for ~$100/share - a 15% premium to DirecTV's Monday close, and a 29% premium to where shares traded before the WSJ's May 1 report about deal talks.
- The acquisition price values DirecTV at $51B, or over $66B after factoring net debt.
- Bloomberg adds that under discussed plans, DirecTV CEO Mike White plans to retire after 2015.
- DTV now +5.6% AH to $92.
- Earlier: AT&T/DirecTV deal could reportedly be announced in two weeks
Mon, May. 12, 4:32 PM
- The WSJ reports AT&T (T) and DirecTV (DTV) are discussing a cash/stock deal that could be announced in as soon as two weeks.
- The paper adds adds AT&T is likely to pay a premium to Dish's current stock price.
- Though a merger would be costly - DirecTV currently goes for over 17x 2015E EPS after factoring over $15B in net debt - AT&T investors have been signaling they aren't bothered by a deal that stands to increase AT&T's bundling opportunities, while also lower the telco's exposure to both its slumping wireline voice ops and a mobile business that's beginning to see tougher price competition.
- DTV +1.5% AH
- Last week: DirecTV reportedly talking with advisers about AT&T deal
Thu, May. 8, 2:52 PM
- Dish Network (DISH -4.9%) CEO Charlie Ergen told analysts on the company's earnings call this morning that a bid for DirecTV (DTV -4.2%) would be too expensive despite the considerable synergies that could be derived from a combination.
- Ergen did give some hints on what he thinks would be a good strategy. "I wasn’t a very good poker player but when a bunch of drunken fools were throwing money around occasionally I was able to pick up the pot at the end of the day," noted the exec.
- Shares of both satellite pay-TV providers are off today with Ergen throwing a wet towel on merger speculation.
- Earnings call transcript
Thu, May. 8, 11:05 AM
Wed, May. 7, 4:09 PM| 9 Comments
Tue, May. 6, 8:28 AM
- Shares of DirecTV (DTV) move higher in premarket trading after the company bests revenue estimates with its Q1 report.
- The company saw 12K net additions in the U.S. during the period which missed the estimate for a 14K rise.
- Costs were kept under control in Q1 as DirecTV's adjusted operating profit margin improved 60 bps Y/Y.
- DTV +2.2% premarket
Tue, May. 6, 7:39 AM| 1 Comment
Tue, May. 6, 7:36 AM
Mon, May. 5, 5:30 PM
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Fri, May. 2, 12:51 PM
- Shares of Dish Network (DISH +2.1%) are putting in another day of solid gains as the stock continues to benefit from M&A speculation stirred up after a story broke on talks between AT&T (T +0.1%) and DirecTV (DTV -1.3%).
- Some media analysts think the dalliance of AT&T with DirecTV is just a bluff to get Dish Network to the table on a deal for wireless spectrum. If that's the case, it would be the type of poker that Dish CEO Charlie Ergen is also known to play.
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