Despite reporting earnings that were just in line with expectations, DirecTV shares have been trading off about 3 percent all day. Why? The satellite TV provider's earnings were in line with expectations, but the stock has gained 15 percent since August, without a pause.
This may very well be an example of "sell on the news."
Bernstein Research analyst Craig Moffett calls the satellite TV operator "Pay TV's Blue Chip," noting that its positioning at the "high end" of offerings has been rewarded — again.
Morgan Stanley's Ben Swinburne echoed management confidence that growth will continue — he reiterated his "Buy" on the stock, citing the company's investment in its growing subscriber base.
The satellite TV operator reported 31 percent higher earnings than last year of 55 cents per share. Average revenue per subscriber — a key metric in the pay TV business — grew 4.3 percent, which is a hair behind analysts expectations. The company also posted a hair slightly higher "churn" than analysts expenses.
Still, DirecTV is really a growth story, a contrast what we saw from cable players.
While rivals Time Warner Cable, Comcast and Cablevision report that they're losing video subscribers, DirecTV's adding far more subscribers than Wall Street expected — 174,000 new subscribers in the US, and 206,000 in Latin America.
On the company's earnings call management said strength in the US and Latin America is on track to continue. On expanding in the un-saturated Latin America Market, CEO Michael White said "there's a key advantage we have: The product is just better." The company's taking what it's learned in the US market to grow in Latin America. And inversely, White says the company also has learned from Latin America to have more flexibility in its US business.
Like Time Warner Cable, DirecTV is seeing weaker demand at the lower end, and wants to offer some choices. Appealing to a higher-end affluent customer has worked in DirecTV's favor, but it doesn't want to price itself out of growth.
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