EchoStar In Danger Of Losing Share To DirecTV

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lee78221

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Jul 6, 2005
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Morgan Stanley analyst Benjamin Swinburne downgraded his rating on shares of EchoStar Communications to "equal weight" from "overweight," citing the growing threat DirecTV poses to EchoStar's DISH satellite television network.

"We continue to believe that EchoStar is well-positioned for high-definition programming expansion," Swinburne wrote in a note to investors Tuesday.

The analyst added that EchoStar has a defendable subscriber base as the price leader in the market, and has a management team that focuses on the long term.

Even though shares of both EchoStar (nasdaq: DISH - news - people ) and DirecTV (nyse: DTV - news - people ) have outperformed in an increasingly competitive industry, Swinburne said further upside from EchoStar's fundamental performance alone will likely be limited to 5% to 10%.

The analyst lowered his price target on EchoStar to $33 from $36, reflecting rising year-over-year churn levels at DISH that could result in a deceleration of net customer growth and, in turn, revenue growth.

Swinburne said DirecTV's ramp to meaningful free cash flow in 2008 is less risky than EchoStar's DISH network, given DirecTV's clearer capital spending plan.

And, DirecTV's high-definition program offerings will likely exceed EchoStar's and the rest of the cable industry, giving it a competitive advantage that could be used to drive pricing power, according to the analyst.

Morgan Stanley currently rates DirecTV at "overweight."
http://www.forbes.com/markets/2006/05/17/echostar-directv-0517markets06.html
 
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The market reacts only to the future. So he is looking into 2007. When you hear news about a company the market has reacted already. The market has already reacted to E*s HD offerings. It's going to react to D*. Now the question is will D* meet their expectations, if they don't their stock will drop.
 
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Things can definitely change and you never know where this technology is headed. Just when you think you got it figured out something new comes out that changes everything. Would you imagine that we would be where we are at now five years ago?
 
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