DIRECTV Group, Inc. (DTV)

TrackZacks (71.75) Submitted: 1/31/08 6:17 PM : Start Price: $22.58 DTV Score: 26.70

DIRECTV Looking Enjoyable

Posted Thu Jan 31, 10:18 am ET

Zacks senior media analyst Ann Northrop, CFA reiterates her Buy rating on the shares of cable television company DIRECTV Group, Inc. (DTV). The following excerpts give us an idea about her arguments:

"DIRECTV has vigorously grown its free cash flow and earnings over the last two years. It is now cutting churn-related costs, and raising the quality of its subscriber base by tightening credit standards. We believe the company is poised to sustain its strong revenue and earnings growth. The nearly-completed rollout of 100 HD channels should boost ARPU, and help stem decelerating subscriber growth as DTV overtakes Echostar's (DISH) HD lead with twice as many HD channel offerings, while the cable companies are seven years away from catching up, in our view.

"We think the HD rollout coupled with the regional bell operating company (RBOC) as partner, will defend DTV's market share against cable's ability to offer video, voice and data ( triple play ), which together with recently tightened credit standards have been impeding subscriber growth. At 15x our 2008 EPS estimates, we think DTV shares are relatively inexpensive, and will outperform the market.

"EBITDA for the reported quarter increased 11.3% to $916 million, strong but below our estimate of $925 million. Subscriber acquisition costs (SAC) were higher than expected, as were the costs of upgrading subscribers to the newer MPEG-4 HD equipment in the quarter; programming costs were also slightly higher than we expected. EBITDA margin shrank 60 basis points to 23.6% in the reported quarter from 24.2% in the prior year quarter. We rate the stock as Buy with a six-month target price of $24."

Read the full analyst report on DTV.
http://register.zacks.com/ucd/step1.php?ALERT=FOOL_ZER&d_alert=ZER_CONF&t=dtv&ADID=FOOL_ZERFEED

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