Why DirecTV (DTV) Stock Is Down Today (Update)

Update (4:15 p.m.): Updated with Monday market close information.

NEW YORK (TheStreet) -- DirecTV  (DTV) fell Monday after AT&T  (T) agreed Sunday to purchase the satellite television company for $48.5 billion.

The deal, which both companies' boards approved Sunday, is yet another in the recent string of massive pay-TV mergers. AT&T would pay DirecTV shareholders $95 a share in the transaction, which is valued at approximately $67.1 billion including DirecTV's debt. DirecTV shareholders will receive $28.50 a share in cash and $66.50 a share in AT&T stock.

The stock closed down 1.77% to $84.65.

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Separately, TheStreet Ratings team rates DIRECTV as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DIRECTV (DTV) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, DTV's share price has jumped by 30.61%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DTV should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DTV's revenue growth trails the industry average of 14.9%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DIRECTV's earnings per share declined by 9.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DIRECTV increased its bottom line by earning $5.19 versus $4.61 in the prior year. This year, the market expects an improvement in earnings ($5.90 versus $5.19).
  • Net operating cash flow has slightly increased to $1,590.00 million or 3.51% when compared to the same quarter last year. Despite an increase in cash flow, DIRECTV's average is still marginally south of the industry average growth rate of 5.70%.
  • 48.68% is the gross profit margin for DIRECTV which we consider to be strong. Regardless of DTV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.14% trails the industry average.
  • You can view the full analysis from the report here: DTV Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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