Sanford Bernstein analyst Craig Moffett Friday upgraded Dish Network shares to a “market perform” rating, although he warned that if a judge forces the satellite provider to shut down 4 million set-tops as the result of a TiVo judgment it “could be crippling for the company.”
Dish shares were down 90 cents, or 6%, to $15.19 in early Friday trading.
“Over the past six weeks, Dish shares have dropped by over 40%,” Moffett wrote in a report Friday. “But as Dish shares have tumbled, key risks have evaporated. Our underperform thesis was premised on risks that subscriber growth could turn negative, and that AT&T's support looked wobbly. Both risks have now been resolved (unfortunately, the wrong way) but now are finally fully priced in. And most importantly, the constant, incessant assumption that AT&T was an ‘inevitable’ acquirer of Dish has finally, at long last, been put to rest.”
Moffett was referring to AT&T’s decision last month to use DirecTV as its sole reselling partner next year, not extending its deal with Dish Network.
The termination of the reselling agreement has prompted Wall Street to say that a merger between AT&T and Dish Network is unlikely.
“Dish now trades at approximate parity to DirecTV, as both have fallen to all-time lows in the general market sell-off,” Moffett wrote.
Moffett downgraded Dish Network’ stock in August to “underperform.”
In his latest report, Moffett made reference to Dish Network’s ongoing litigation with TiVo. Earlier this week, the U.S. Supreme Court let stand a $74 million jury verdict against Dish for violating TiVo patents with its DVRs. Dish Network paid over that money with interest, $104.6 million, this week to TiVo.
But TiVo has charged that Dish Network is in contempt of court, alleging that the satellite provider’s DVRs still violate its patents. Dish Network says it has downloaded new software and its boxes are not infringing on TiVo’s patent.
“A ruling on Dish's contempt hearing in Texas is imminent,” Moffett wrote. “A worst-case scenario of a shut-down of more than 4 million DVRs could be crippling to the company.”