Is Dish Network a Buy?

dish

With shares of Dish Network (NASDAQ:DISH) trading around $41, is it 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. Most notably, the company has pulled away from a bidding war over Clearwire (NASDAQ:CLWR), which may prove positive. As a television giant, look for Dish Network to provide the services that consumers and companies love.

T = Technicals on the Stock Chart are Strong

Dish Network stock has been on a powerful move higher in the past few years. The stock is now trading near highs for the year and looks ready to continue upward. Analyzing the price trend and its strength can be done using key simple moving averages: 50-day (pink), 100-day (blue), and 200-day (yellow). As seen in the daily price chart below (source: Thinkorswim), Dish Network is trading above its rising key averages, which signals neutral to bullish price action in the near term.

DISH

Taking a look at the implied volatility 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

37.38%

3%

0%

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 past 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of Thursday, there is 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 very small amount of call and put option contracts, and are leaning neutral to bullish over the next two months.

 

E = Earnings Are Decreasing Quarter-Over-Quarter

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

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

-41.25%

-34.09%

-149.30%

-33.33%

Revenue Growth (Y-O-Y)

-0.74%

-1.15%

-2.20%

-0.51%

Earnings Reaction

-2.04%

-0.16%

3.35%

-0.22%

Dish Network has seen decreasing earnings and revenue figures in the past four quarters. From these numbers, the markets have not been too 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 (NYSE:DTV), Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA) — and sector?

Dish Network

Directv

Time Warner Cable

Comcast

Sector

Year-to-Date Return

13.52%

20.83%

9.21%

8.57%

11.49%

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

Conclusion

Dish Network provides in-demand national and local programming to consumers across the U.S. The stock has been on a powerful move higher and is now trading near highs for the year. In the past four quarters, investors in the company have not been too pleased, as earnings and revenue figures have been declining. Relative to its peers and sector, Dish Network has been a year-to-date performance leader. Look for Dish Network to OUTPERFORM.

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