Are All-Time Highs Supported By DIRECTV?

With shares of DIRECTV (NASDAQ:DTV) trading around $56, is DTV an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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T = Trends for a Stock’s Movement

DIRECTV provides digital television entertainment in the United States and Latin America. The company engages in acquiring, promoting, selling, and distributing digital entertainment programming primarily through satellite to residential and commercial subscribers. A rising number of consumers are opting for satellite services due to the reduced costs and increased coverage offered. DIRECTV is poised to capitalize on the increased entertainment demand from consumers in the United States and Latin America.

Head on over to the next page to explore the technical landscape of DIRECTV’s stock…

T = Technicals on the Stock Chart are Strong

DIRECTV has displayed a beautiful uptrend of higher highs and higher lows since its initial public offering in 2004. Currently, the stock just traded at all-time highs. 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, DIRECTV is trading well above its rising key moving averages which signal a strong uptrend in the near-term.

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DTV

(Source: Thinkorswim)

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

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

DIRECTV Options

23.29%

36%

33%

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

Put IV Skew

Call IV Skew

April Options

Flat

Average

May 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 small 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 Increasing 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 DIRECTV’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for DIRECTV look like and more importantly, how did the markets like these numbers?

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2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

50.5%

28.57%

19.78%

25.88%

Revenue Growth (Y-O-Y)

7.92%

8.36%

9.45%

11.5%

Earnings Reaction

-2.82%

-0.29%

-2.59%

0.27%

DIRECTV has seen increasing revenue and earnings growth over the last four quarters. From these figures, the markets seem to be expecting a little more from DIRECTV.

P = Excellent Relative Performance Versus Peers and Sector

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

DIRECTV

DISH Network

Comcast

Time Warner

Sector

Year-to-Date Return

9.52%

2.54%

8.98%

-3.12%

9.44%

DIRECTV has been a relative performance leader year-to-date.

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Conclusion

DIRECTV is providing the entertainment options that consumers in the United States and Latin America are excited about. This a long with proper execution of its business has led the company to consistently increase its earnings and revenue. Investors have expected a little more growth but have still bid the stock up to all-time highs. Relative to its peers and sector, DIRECTV stock has been a relative performance leader. Look for DIRECTV stock to continue to OUTPERFORM.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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