Moffett Upgrades DirecTV

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Sanford C. Bernstein Monday upgraded DirecTV’s stock to “market perform” from “under perform,” raising its 12-month price target to $26 a share from $19 for the direct-broadcast satellite provider.

Analyst Craig Moffett said he was upgrading the nation’s-largest satellite provider based on his expectation of faster steady cash flow for it next year “and beyond” as DirecTV’s “high-end positioning takes gross-addition share from EchoStar…and set-top box costs fall faster than previously expected.”

In his report, Moffett noted that DirecTV's stock price had fallen sharply in recent weeks, in the wake of third-quarter earnings reports from it and EchoStar Communications. EchoStar’s pace of subscriber growth was down 63% compared with the third quarter 2006.

“Some of the harsh treatment [of DirecTV] is not justified, in our view,” Moffett wrote. “Painting all pay TV operators with the same brush is a mistake. We believe there is strength at the high-end of the market, where DirecTV operates.”

Moffett also noted that DirecTV’s “underappreciated Latin American business” was “quite frankly, knocking the cover off the ball.”

Finally, Moffett cited Liberty Media’s pending $11 billion purchase of News Corp.’s stake in DirecTV.

He wrote that DirecTV is “about to come under the control of [Liberty Media chairman] John Malone, whose penchant for financial wizardry could potentially unlock latent value” in the satellite provider’s stock.

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