Is DirecTV Still a Winner?

With shares of DirecTV (NASDAQ:DTV) trading at around $49.19, 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:

C = Catalyst for the Stock’s Movement

DirectTV is bucking the trend by continuously growing while competitors are losing customers to streaming. However, it can be debated whether or not DirecTV will be capable of keeping this positive trend going. One big issue is NFL Sunday Ticket, which expires in 2015. The big question here: Has DirecTV established a strong enough brand to eliminate NFL Sunday Ticket when it expires? A logical follow-up question: How many customers will leave if DirecTV doesn’t renegotiate with the NFL for an extension? Of course, this isn’t something to worry about now considering its only 2013, but it’s already beginning to play on investors’ minds. If DirecTV cuts the deal, it will save a lot of money, but the risk is also high due to potential loss of customers. If DirecTV is continuously growing and making a profit with NFL Sunday Ticket, then it wouldn’t make much sense to cut it unless the cost substantially increased, which is a possibility.

DirecTV has been growing by about 5 percent in the United States, but that’s nothing compared to the growth seen in Latin America, where DirecTV is seeing 22 percent growth. DirecTV is still a novelty in countries like Brazil, Venezuela, Columbia, and Argentina. And there is still a lot of room for growth. Better yet, there isn’t much competition.

Overall, DirecTV saw a 1 percent increase in subscribers in 2012. DirecTV is going to alter its strategy in the United States in an attempt to spur a little more growth. This strategy will focus on investing in new shows that will be exclusive to DirecTV. The company already has a good head start since the retention rate is solid. DirecTV will continue to focus on retention more than acquisition in the United States, which will benefit margins, but not growth. There will still be plenty of growth in Latin America.

There are a couple of negatives to point out. One, programming fees are likely to increase going forward. Two, Venezuela decided to devalue its currency, which led to a $161 million charge for DirecTV.

Let’s take a look at some important numbers prior to forming an opinion on the stock.