Analyst Eagan Starts Coverage of Liberty Entertainment

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Collins Stewart analyst Tom Eagan has initiated coverage of Liberty Entertainment shares, issuing a “buy” rating Friday that cited the strength of DirecTV.

Liberty Entertainment shares were off $1, or 6%, to $16.52 in Friday afternoon trading.

Liberty Entertainment holds Liberty Media’s 52% stake in DirecTV, and in his report Friday Eagan was bullish on the prospects for the nation’s largest satellite provider. He called DirecTV “one of the best-positioned companies in the subscription TV space,” citing in part AT&T’s recent decision to pick DirecTV as its only satellite partner for a triple-play package.

That decision, according to Eagan, means the “probability” of AT&T acquiring DirecTV “has increased.”

In September, Liberty Media’s board approved the transformation of Liberty Entertainment from a tracking stock to an asset-based stock.

Last month, at Liberty Media’s investor day chairman John Malone downplayed the prospect that Liberty Entertainment would quickly move to increase its stake in DirecTV.

“Just because we’re spinning this to our shareholders, don’t expect some quick shotgun marriage between DirecTV and the entertainment unit,” Malone said.

With Liberty Entertainment’s stock now trading at a discount, Eagan doesn’t think it will seek to acquire the rest of DirecTV. Instead, the analyst suggested that DirecTV could try to acquire Liberty Entertainment.

In there is no Liberty Entertainment-DirecTV merger, Eagan wrote that he expected that Liberty Entertainment would sell its DirecTV stake to AT&T.

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