Is Dish Network a Good Portfolio Play?

With shares of Dish Network (NASDAQ:DISH) trading around $65, is DISH an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Dish Network is a pay-television provider that offers a range of local and national programming, featuring more national and local high-definition channels than most pay-TV providers. A rising number of consumers are opting for satellite services due to the reduced costs and increased coverage offered. Dish Network is poised to capitalize on this rise in consumer interest as entertainment takes center stage for consumers in the United States.

Dish Network voiced opposition to the merger between Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) in a statement to the Federal Communications Commission (FCC). Dish Network CEO Charlie Ergen laid out his case, citing the potential fallout from the proposed deal. Ergen believes Dish will be squeezed out as a result of the mega deal that proposes to combine the top two cable providers in the US. His statement included concerns over rising distribution costs, which he said the combined entity could demand from content producers given its increased leverage. According to latest figures, the two will combine to have more than 30 million subscribers. Ergen also said the merger could lead to the new company completely dominating the Internet market. Both companies own significant supply points and according to Ergen, these could prove to be harmful for consumers. While these concerns sound reasonable, Dish’s opposition also appears like just another instance of Ergen finding a way to get in the middle of a pending deal.

T = Technicals on the Stock Chart are Strong

Dish Network stock has been steadily trending higher in the past several years. The stock is currently moving higher and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Dish Network is trading above its rising key averages which signal neutral to bullish price action in the near-term.

DISH

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Dish Network options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Dish Network Options

48.38%

66%

63%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Dish Network’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Dish Network look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

-19.15%

35.73%

294.29%

-104.00%

Revenue Growth (Y-O-Y)

6.46%

25.48%

2.27%

1.12%

Earnings Reaction

-4.02%

1.48%

6.00%

0.44%

Dish Network has seen mixed earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have been pleased with Dish Network’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Dish Network stock done relative to its peers, DirecTV (NASDAQ:DTV), Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA), and sector?

Dish Network

DirecTV

Time Warner Cable

Comcast

Sector

Year-to-Date Return

12.48%

25.12%

9.63%

4.59%

13.94%

Dish Network has been a relative performance leader, year-to-date.

Conclusion

Dish Network offers a television subscription service that provides national and local programming to consumers in the United States. The company voiced opposition to the merger between Comcast and Time Warner Cable in a statement to the FCC. The stock has been steadily trending higher over the last several years and looks poised to continue. Over the last four quarters, earnings have been mixed while revenues have been rising, which has left investors pleased. Relative to its peers and sector, Dish Network has been a year-to-date performance leader. Look for Dish Network to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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