DirecTV Will Keep Climbing, With or Without AT&T

With yet another quarter of huge subscriber growth in emerging markets and improving profitability in mature ones, the pay-TV giant remains a great bet.

May 7, 2014 at 12:30PM

DirecTV (NASDAQ:DTV) gave investors yet another reason to rally behind the stock this week as it reported a better-than-expected bottom line. As opposed to many pay-TV businesses that have a hard time maintaining video subscribers in the mature, disrupted U.S. market, DirecTV continues to add new users to its legions and further solidify its position as the biggest pay-TV business in the industry. Though the biggest news revolves around a potential merger between DirecTV and telecom giant AT&T (NYSE:T), there are plenty of reasons to love this king of satellite.

More of the same
It's wholly unsurprising but nonetheless impressive to see that DirecTV tacked on another six-digit round of net subscriber gains for its fiscal first quarter, led again by huge growth in Latin America. Passing 38 million subscribers total, the company added on 361,000 net users in LatAm, with an additional 12,000 in North America.

DirecTV's approach for the last few years has been meaningful subscriber growth as the biggest pay-TV presence in Latin America, with improving profitability sourced from the more mature domestic market. The company has steadily increased ARPU (average revenue per unit) in North America, with a recent gain of roughly 4%. Though year-over-year subscriber gains were slower in the segment (the company tacked on 14,000 in 2013's first quarter), total additions and churn rate remained consistent with prior periods.

Free cash flow increased a massive 25% to $886 million.

Capturing the attention of most is last week's reported story that AT&T had approached DirecTV about a takeover. If it happened, the combined company would be the second biggest pay-TV operator in North America, right behind Comcast. It would also have considerable pricing power in content-fee negotiations -- strongly benefiting investors in the newly formed company. Whether a deal will emerge is still to be determined.

Why it'll keep moving
This business is built for long-term gains. Things would, of course, change substantially if a deal emerges between DirecTV and AT&T, but until there is a final answer on that, investors are wise to remain focused on the operating business.

DirecTV has already rewarded investors with a two-year gain of nearly 70%, even while naysayers tout Internet streaming and content costs as a huge headwind facing the company. While the concern is valid, the company's competitive position remains strong, especially in Latin America, where pay-TV penetration is relatively low (below 50%) and competition is minimal.

Going ahead, investors will want to keep an eye on the usual suspects -- ARPU growth in the North American segment, and net subscriber gains in Latin America. These are the two most important things to watch, even if subscriber gains slow in the U.S. and Canada. All in all, DirecTV remains a great pick for price-conscious investors with an eye for growth.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers