Is Dish Network a Buy At Current Prices?

With shares of Dish Network (NASDAQ:DISH) trading around $47, 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.

Last week, Dish Network, working with the Federal Communications Commission, made some changes to its wireless spectrum that increased the value of the spectrum by $1 billion, according to analysts cited by the Wall Street Journal. Dish has been steadily acquiring wireless spectrum for several years as CEO Charlie Ergen seeks to take the company into the wireless phone industry. On Tuesday, Dish agreed to stop plans to use its spectrum for a TV broadcast service due to concerns that the plan would cause interference with other services. Instead, Dish is looking to make some technical changes that could allow the spectrum to be used for the downloading of information, which would cause less interference and allow Dish to use a greater volume of the spectrum it owns.

T = Technicals on the Stock Chart Are Strong

Dish Network stock has been surging higher over the last few years. The stock is currently trading slightly below highs for the year and near 2007 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, 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

30.14%

0%

0%

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

Put IV Skew

Call IV Skew

October Options

Flat

Average

November 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 very minimal 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 Declining 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?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-104.00%

-41.25%

-34.09%

-149.30%

Revenue Growth (Y-O-Y)

1.12%

-0.74%

-1.15%

-2.20%

Earnings Reaction

0.44%

-2.04%

-0.16%

3.35%

Dish Network has seen declining earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about 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

29.02%

23.88%

15.37%

18.87%

19.76%

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 has made positive changes to its spectrum that continues to produce great things for the company. The stock has been trending higher over the last few years and is now trading slightly below highs for the year. Over the last four quarters, investors have had mixed feelings about the company as earnings and revenues 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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