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Doug Shapiro, the Banc of America analyst best known for his cable TV work, jumped into the satellite TV game late last week.

In a research note released Friday, Shapiro initiated coverage of EchoStar with a "strong buy" and year-end 2003 price target of $33 and Hughes with a "buy" and year-end 2003 price target of $15.

The analyst said both EchoStar and Hughes should become free cash flow machines as subscriber growth slows. "We believe the industry is nearing this inflection point, with EchoStar expected to generate free cash flow next year and Hughes expected to generate free cash flow in 2004," Shapiro said.

"Although the DBS sector has undergone a painful transition over the past few years as subscriber growth has slowed and SAC and churn have climbed, we believe that a powerful financial story is emerging now," Shapiro said.

Shapiro also tackled the pending merger between the two companies. He said the proposed combination would materially boost industry profitability, but added "we think the odds are stacked against approval."

From SkyReport (Used with Permission)
 
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