The firm notes that with 20 million subscribers, DirecTV is the country's leading satellite television provider and the pending merger with AT&T (T) could yield higher than expected synergy targets for the two companies.
"We continue to believe that the announced synergy targets by AT&T remain highly conservative. Should the combined entity be successful at better cross-selling services, we believe the stock price performance could track prior large deals," said the firm.
DirecTV shares are down 0.2% to $86.42 in early market trading today.
Separately, TheStreet Ratings team rates DIRECTV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DIRECTV (DTV) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and increase in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 34.74% and other important driving factors, this stock has surged by 48.42% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- DIRECTV has improved earnings per share by 34.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. 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 ($5.91 versus $5.19).
- 48.46% 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 9.93% trails the industry average.
- Net operating cash flow has remained constant at $1,474.00 million with no significant change when compared to the same quarter last year. Despite stable cash flow, DIRECTV's cash flow growth rate is still lower than the industry average growth rate of 14.05%.
- You can view the full analysis from the report here: DTV Ratings Report
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