Dish Network stock (NASDAQ
NDAQ : DISH) has declined by almost 35% year-to-date, falling to near 14-year lows. The sell-off is driven by several factors. Firstly, the company faced a cybersecurity attack on February 23, which impacted its internal communications, call centers as well as applications, and websites. Although we don’t have too many specific details on the attack, it apparently impacted the company’s customer onboarding, bill payments, and customer care operations for almost three weeks. This could potentially impact the company’s subscriber numbers and revenues over Q1 2023. Separately, Dish’s results for Q4 2022 were also mixed, with revenue falling short of estimates, declining by 9% versus the year-ago quarter, as the company lost another 268,000 net pay TV subscribers, although earnings were slightly ahead of estimates. Investors have also been treading cautiously with the stock in a rising interest rate environment, given the company’s high debt load (over $20 billion in debt) and its considerable capital requirements for building out its nationwide wireless business.
We are cutting our price estimate for Dish from about $21 per share to $14 per share, due to the current headwinds including rising rates and revenue pressures. However, our price estimate is still about 55% ahead of the current market price. See our analysis on Dish Network Valuation:Expensive Or Cheap for more details. There are still a couple of reasons to remain positive on Dish stock at current levels of about $9 per share. We think Dish’s valuation could be supported by its upside potential from its 5G wireless rollout. Moreover, Dish’s massive spectrum holdings should also provide a backstop for the stock. The company holds around 150 MHz of value sub-6 GHz frequency, compared to Verizon and AT&T
T which own around 290 MHz each, per UBS. Although regulations prevent existing wireless carriers from buying Dish’s spectrum assets before 2026, the spectrum is nevertheless very valuable given the growing demand for bandwidth, the higher spectrum intensity of 5G versus earlier technologies, and also considering the fact that airwaves are a scarce resource. Dish also trades at under 7x consensus 2023 earnings, which makes the risk-to-reward trade-off for the stock more acceptable.