Does DirecTV Support a Rising Stock?

With shares of DirecTV (NASDAQ:DTV) trading around $64, 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:

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.

DirecTv announced an increase in third quarter 2013 revenues of 6 percent to $7.88 billion, operating profit before depreciation and amortization (OPBDA) of 15 percent to $1.93 billion, operating profit of 15 percent to $1.23 billion, and earnings per share of 42 percent to $1.28 compared to last year’s third quarter.

“DirecTv’s diversified portfolio of businesses across the Americas delivered another solid quarter of consolidated results highlighted by strong top-line growth and continued operational discipline across disparate geographies, macro-economic conditions and competitive environments,” said Mike White, President and CEO of DirecTv. “We continue to extend our position as the world’s largest Pay TV service by leveraging the strength of our premier brands and our differentiated suite of products and services across the Americas to drive industry leading growth.”

T = Technicals on the Stock Chart Are Strong

DirecTV stock has been trending higher in recent years. The stock is currently trading near 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 above its rising key averages, which signal neutral to bullish price action in the near-term.

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

25.25%

0%

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 last 30 and 90 trading days.

Put IV Skew

Call IV Skew

December Options

Flat

Average

January 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?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

42.22%

8.26%

12.15%

51.81%

Revenue Growth (Y-O-Y)

6.26%

6.59%

7.58%

7.92%

Earnings Reaction

-0.25%*

-2.02%

6.88%

-2.82%

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

* As of this writing

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 Cable

Sector

Year-to-Date Return

27.97%

32.72%

27.70%

23.82%

29.05%

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

Conclusion

DirecTV is a digital television entertainment company that offers satellite services to consumers and companies across the nation. The company recently reported earnings and revenue figures that increased in the third quarter. The stock has been trending higher in recent years and is now trading slightly below all time highs. Over the last four quarters, earnings and revenues have been rising, leaving investors pleased about recent earnings announcements. Relative to its peers and sector, DirecTV has been a relative performance leader year-to-date. Look for DirecTV to OUTPERFORM.

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