UBS Downgrades DirecTV, Predicts Lower Sub Growth

Mike White - DirecTV CEO - 2010
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The satellite TV giant, led by CEO Mike White, will have to focus "less on subscriber growth and more on retention and profitability," says analyst John Hodulik.

NEW YORK - UBS analyst John Hodulik has turned bearish on satellite TV giant DirecTV, downgrading its stock from "buy" to "neutral," citing a likely slowdown in subscriber growth this year.

As a result, he also cut his price target on the stock from $53 to $46 on Wednesday. DirecTV is led by chairman and CEO Mike White who has gotten positive reviews from Wall Street.

"The maturity of the U.S. pay TV market and increased competition from cable will require DirecTV to focus less on subscriber growth and more on retention and profitability," he wrote in a report. "While this strategy may make sense given the state of the industry, we believe it will result in slower growth, making [stock] multiple expansion hard to envision."

Hodulik now looks for DirecTV U.S. net subscriber additions of only 88,000 in 2012, down from his previous 344,000 estimate. For 2011, his estimate stands at 681,000.

"However, average revenue per user growth and churn are likely to improve as the company cuts promotions and discounts," Hodulik said.

DirecTV's stock has traded between $39.82 and $53.40 over the past year. On Tuesday, it closed at $43.50.


Twitter: @georgszalai