With shares of DirecTV (NASDAQ:DTV) trading around $68, 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.
T = Trends for a Stock’s Movement
DirecTV provides digital television entertainment in the United States and Latin America. The company engages in acquiring, promoting, selling, and distributing digital entertainment programming primarily through satellite to residential and commercial subscribers. A rising number of consumers are opting for satellite services due to the reduced costs and increased coverage offered. DirecTV is poised to capitalize on the increased entertainment demand from consumers in the United States and Latin America.
Broadcasting National Football League games is not a cheap proposition. The NFL is big business: Viewership is growing, and 46 of the 50 most-watched television broadcasts of 2013 were NFL games. In fact, with revenues totaling $9 billion in 2012, the NFL is the most profitable sports league in the world. With such brand recognition, it is possible for the league’s management to exact a hefty sum from DirecTV for exclusive licensing rights to all NFL Sunday afternoon games. Under the terms of the current agreement that runs through the end of the 2014 season, the satellite-television provider pays $1 billion per season.
Those terms allow DirecTV to offer subscribers a package known as “Sunday Ticket,” a channel designed to give football fans access to out-of-market games via a live feed of Sunday afternoon games across the country. Around 2 million of the company’s 20 million United States subscribers pay around $250 for the basic package, and Sunday Ticket is a means for the company to fend off competitors, especially Web-based rivals that are hungry to offer subscribers exclusive content.
T = Technicals on the Stock Chart Are Strong
DirecTV stock has been trending higher in recent years. The stock is currently trading near all-time highs and looks set to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, DirecTV is trading above its rising key averages, which signals neutral to bullish price action in the near-term.
Source: Thinkorswim
Taking a look at the implied volatility (red) and implied volatility skew levels of DirecTV options may help determine if investors are bullish, neutral, or bearish.
|
Implied Volatility (IV) |
30-Day IV Percentile |
90-Day IV Percentile |
|
| DirecTV options |
25.35% |
80% |
78% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.
|
Put IV Skew |
Call IV Skew |
|
| February Options |
Flat |
Average |
| March Options |
Flat |
Average |
As of Friday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on DirecTV’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for DirecTV look like and more importantly, how did the markets like these numbers?
|
2013 Q3 |
2013 Q2 |
2013 Q1 |
2012 Q4 |
|
| Earnings Growth (Y-O-Y) |
42.22% |
8.26% |
12.15% |
51.81% |
| Revenue Growth (Y-O-Y) |
6.26% |
6.59% |
7.58% |
7.92% |
| Earnings Reaction |
-1.3% |
-2.02% |
6.88% |
-2.82% |
DirecTV has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with DirecTV’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has DirecTV stock done relative to its peers – Dish Network (NASDAQ:DISH), Comcast (NASDAQ:CMCSA), and Time Warner Cable (NASDAQ:TWC) — and sector?
|
DirecTV |
Dish Network |
Comcast |
Time Warner Cable |
Sector |
|
| Year-to-Date Return |
0.73% |
-0.52% |
-1.52% |
-1.27% |
-1.64% |
DirecTV has been a relative performance leader, year-to-date.
Conclusion
DirecTV is a digital television entertainment company that offers satellite services to consumers and companies across the nation. The company is trying to attain exclusive licensing rights to all NFL Sunday afternoon games. The stock has been trending higher in recent years and is now trading slightly below all-time highs. Over the last four quarters, earnings and revenues have been rising, leaving investors pleased about recent earnings announcements. Relative to its peers and sector, DirecTV has been a relative performance leader in the year to date. Look for DirecTV to OUTPERFORM.
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Read the original article from Wall St. Cheat Sheet