Is DirecTV a Flash in the Pan?
By
Anders Bylund
August 8, 2008
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DirecTV (NYSE: DTV) is showing some growth muscle and touting new features that help it compete with the cable guys. Is that enough to inspire a long-term investment? Maybe not.
The satellite TV service provider reported $0.40 of earnings per share on $4.81 billion in second-quarter revenue. That's an 8% year-over-year improvement in earnings, and a 16% jump in sales. I'd prefer profits that grew faster than sales; this report contrasts poorly to satellite rival Dish Network's (Nasdaq: DISH) report earlier this week, which saw earnings leap 48% on a mere 5.6% revenue uptick.
Meanwhile, cable giant Comcast (Nasdaq: CMCSA), presented matching 11% gains in sales and earnings per share. As fellow Fool David Lee Smith points out, Comcast is a model of consistency.
DirecTV credited its new on-demand service for some of its sales growth, along with attractive digital video recorder packages and a market-leading high-definition channel lineup.
I'll grant DirecTV the HD content lead for now, but staying ahead of the pack in that race is an expensive effort. There are satellite launches to pay for, and customer set-top boxes that need upgrades in order to read some of the new MPEG-4 content. As for the other two churn-busting advantages, well, everyone and his grandma can sell you a DVR these days, and the on-demand service actually only works if you're paying the cable guys or the phone company for a high-speed Internet connection. It seems to me that Comcast, Verizon (NYSE: VZ), and AT&T (NYSE: T) win a little bit every time DirecTV signs up another double-play customer. And there will never be a true triple play here, unless the company buys Sprint (NYSE: S). Somehow, I doubt that'll happen.
So bravo to DirecTV for signing up 129,000 new subscribers at churn rates that would make TiVo (Nasdaq: TIVO) or Netflix (Nasdaq: NFLX) smile. I think there's a time limit on the company's growth ride, so long-term investors need not bother.
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