Less than five months after his “sell” rating on Dish Network sent the stock into a tizzy, MoffettNathanson principal and senior analyst Craig Moffett has raised his outlook on the satellite giant to “neutral,” adding that the steep decline in share price over the past several months shows the market is finally reflecting the risk of a sale or a build out of its wireless spectrum.
Market reaction to the upgrade was lukewarm at least in early trading, where shares rose 11 cents each (0.4%) to $25.99 per share.
Dish shares were down about 48% in 2018 according to Moffett, compared to the S&P 500 Index, which fell 4% in the same period. Moffett has warned in the past that investors have placed too high a value on Dish’s wireless spectrum, which it has said it will begin building out to meet a March 2020 federal deadline.
In August, Moffett downgraded Dish to “sell,” claiming that the only recourse for the satellite company was to sell that spectrum, which he valued at about $1 per MHz POP (compared to some valuations as high as $3 per MHz POP), and sending its stock down about 4%. On Thursday he wrote that the decline in Dish’s stock price has brought the risk-reward to owning the shares into balance.
“Yes, there is still a great deal of downside risk if Dish Network doesn’t sell its spectrum,” Moffett wrote. “But there is also upside risk if they do.”
Moffett added that at its current mid-$20s range, Dish stock reflects both sides of the risk equation. If there is no sale, Dish stock will likely fall even further, but if there is a sale, it will be at a price that is “meaningfully above” its current level, he wrote.
Dish has said it will spend about $1 billion on the first phase of the network, which it envisions as a narrowband IoT offering connecting devices and technologies across the spectrum. According to its federal requirements, Dish must build out the spectrum to 70% of its license territory by March 2020. Dish has said it has every intention of meeting that deadline.