Dish Network Stock Set For A 25% Gain?

We believe Dish Network stock (NASDAQ: DISH) may be a good opportunity right now. DISH trades at $33 currently and is, in fact, down 7% since the beginning of 2020 when it was at $35. It traded at $41 in February 2020 – just before the coronavirus pandemic hit the world – and is currently 20% below that level, as well. DISH stock has recovered an impressive 82% from its March 2020 lows of a little over $18. DISH managed to outperform the broader market as it posted better than expected results in Q2 as well as Q3 2020, along with its 5G and postpaid mobile plans being on track. The gradual opening up of the economy is expected to lead to recovery in consumer spending in the coming quarters. This will drive the commercial/industrial customers to come back to its fold as the current crisis gradually abates. Additionally, as the company continues on its track of 5G expansion, revenue and margins are set to improve in 2021, which is likely to drive the stock higher by close to 25% from its current level. Our conclusion is based on our comparative analysis of Dish Network’s stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.

2020 Coronavirus Crisis

Timeline of 2020 Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • Since 3/24/2020: S&P 500 recovers 70% from the lows seen on Mar 23, 2020, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.

In contrast, here is how DISH stock and the broader market fared during the 2007-08 crisis.

Timeline of 2007-08 Crisis

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  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

DISH and S&P500 Performance Over 2007-08 Financial Crisis

DISH stock crashed from levels of about $38 in September 2007 (pre-crisis peak) to levels of $11 in March 2009 (as the markets bottomed out), implying DISH stock lost 70% from its approximate pre-crisis peak. It recovered post the 2008 crisis, to levels of close to $21 in early 2010, rising by 85% between March 2009 and January 2010. In comparison, the S&P 500 Index saw a decline of 51% and recovered 48%.

DISH Fundamentals Over Recent Years

DISH revenues decreased from $15.2 billion in 2015 to $12.8 billion in 2019 due to lower subscriber-related revenues as an increasing number of users are switching to SVOD (streaming-video on demand) platforms, like Netflix NFLX and Amazon AMZN . Along with lower revenues, margins declined over recent years with EPS decreasing from $3.22 in 2015 to $2.92 in 2019. However, the company’s Q3 revenues saw a 43% rise, while earnings increased 30%. Improvement in financials was driven by the impact of Boost Mobile acquisition.

Does DISH Have Enough Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?

DISH’s total debt decreased from $15.5 billion in 2016 to $14 billion at the end of Q3 2020, while its total cash went down from $5.4 billion to $2.8 billion over the same period. Also, DISH generated healthy cash from operation of $3.4 billion in the last 12 months, which provides the company enough liquidity cushion to weather the current crisis.

Conclusion

Phases of Covid-19 Crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment

Despite the recent surge in the number of new Covid-19 cases in the U.S., we expect continued improvement in demand to buoy market expectations. As investors focus their attention on expected 2021 results, we believe DISH Network stock has the potential for strong gains once fears surrounding the Covid outbreak are put to rest. Based on Dish Network Valuation, Trefis has a fair price estimate of $40 per share for DISH’s stock, reflecting a potential upside of close to 25% from current levels.

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