Dish Network beat most analysts' estimates for the second quarter, reporting a 26,000 rise in net new subscribers, and its stock soared more than 6% ($1.21 per share) to $19.63 each in early trading Monday.
Analysts' had expected the second quarter would be another one of heavy losses for the satellite TV giant, with consensus estimates for a loss of 131,000 subscribers.
While Dish beat that estimate soundly, most analysts who follow the No. 2 satellite company don't believe it is out of the woods yet. Subscriber acquisition costs were markedly higher in the period -- SAC was 7.5% above the first-quarter levels at $708 per subscriber, mainly due to promotions and advertising costs.
Revenue in the period declined 0.4% to $2.9 billion and operating income dropped 57% from $620.7 million in the prior year to $262.8 million.
In a research note, Sanford Bernstein cable and satellite analyst Craig Moffett wrote that while the subscriber gain was encouraging -- he noted that Dish boosted customers the "right way" through gross subscriber additions -- the SAC increase points to bigger problems.
"But as is so often the case with Dish Network, it's where investors weren't looking that holds the key," Moffett wrote, adding that despite the subscriber gains the company's cost structure continues to be weak -- high subscriber- related expenses eroded adjusted cash flow margins in the period to 24.3% from 29.8% in the prior year.
"Valuations based on old assumptions about margins, earnings, and free cash flow will all need to be revisited... and not for the better," Moffett wrote.
Dish is expected to hold its second-quarter earnings conference call with analysts at noon today.