After detailing Dish Network’s “breathtaking” fall from Wall Street grace, MoffettNathanson analyst Craig Moffett upgraded the satellite TV operator’s rating to “neutral” today, postulating that the “worst is finally over” for Dish.
“The case for an upgrade … is relatively straightforward,” Moffett wrote in a note to investors today. “Dish was overvalued. It isn’t anymore. By our valuation of the core satellite TV business, Dish’s spectrum portfolio is now trading at a reasonable $1 per MHz-POP (tax effected under the new tax rate).”
As the analyst noted, Dish shares have hit 52-week lows almost daily in recent weeks. The stock has now underperformed the S&P 500 by more than 50 percentage points over the past year.
Call it a soft neutral, Moffett seems to think that it would be only slightly harder to argue for a “sell” rating.
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“In the absence of a sale, there is a very real risk that some of Dish’s most valuable spectrum licenses will simply be lost,” he said. “Dish is obligated to reach 70% coverage (by population) in each of 172 different AWS-4 licenses in just 24 months. Notwithstanding the company’s assurances that they can build a narrowband IoT network in that time, it is not clear to us that that is possible anymore; there are widespread reports of labor shortages, and wireless work crews are at this point backlogged well into next year.”
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Then there’s Dish’s core satellite TV business, which lost another 200,000 customers in the fourth quarter.
Moffett said the satellite business’ free cash flow is set to decline to zero by the end of his firm’s forecast period.