Satellite TV provider Dish Network Corp. (NASDAQ:DISH) will release its fourth-quarter earnings report ahead of the open on Monday. The company has quite a bit on its plate this year, so investors may be looking at more than just the company’s bottom- and top-line earnings figures.
That could create some interesting activity for DISH stock.
By the numbers, Wall Street is expecting a fourth-quarter profit of 43 cents per share from DISH. Expectations have trended lower in recent weeks, as industry concerns grow regarding rising content costs, declining subscribers and the popularity of web-streaming services. On that final note, DISH’s recently launch Sling TV service could be the company’s “in” with the so-called cord-cutting generation.
Sling TV officially launched last week to the broader public, offering about 20 channels, including the recently added Epix movie service. Any early news on the success of Sling TV signups could be a boon for DISH stock.
Investors will also be keeping a close eye on DISH’s plans for the $13.2 billion worth of wireless spectrum the company picked up in the government auction in January. Before the auction, DISH was the fifth-largest holder of wireless spectrum, and the company needs to utilize about 40% of its prior spectrum by 2016 or lose the rights and the money it has tied up in the venture.
On the sentiment front, Wall Street analysts have taken a bearish stance on DISH stock’s future. According to data from Thomson/First Call, 14 of the 25 analysts following DISH rate the stock a “hold” or worse. Additionally, the 12-month price-target of $75 represents a discount to DISH’s close at $76.29 on Wednesday.
As such, there is room for improvement here, but DISH needs to give these analysts something to cheer about after missing earnings expectations by an average of 15.8% during the past three reporting periods.
On the other hand, options traders are leaning more toward the bullish end of the spectrum. Specifically, the February/March put/call open interest ratio for DISH stock options arrives at 0.58, with calls nearly doubling puts among options set to expire in the next month.
Open interest is heavily centered at the out-of-the-money Mar $80 strike, with 14,399 contracts, though another 12,773 contracts resides at the in-the-money Mar $67.50 strike.
Click to Enlarge Overall, weekly Feb. 27 series implieds are pricing in a potential post-earnings move of about 8.8% for DISH stock. As a result, the upper bound lies at $83.02, while the lower bound lies near $69.56.
This options series is relatively young, so look for expectations to shift heading into the weekend.
2 Trades for DISH Stock
Call Spread: For those looking to join with the bullish crowd in the options pits, a Mar $75/$80 bull call spread holds a lot of potential for profit. At last check, this spread was offered at $2.55, or $255 per pair of contracts. Breakeven lies at $77.55, while a maximum profit of $2.45, or $245 per pair of contracts, is possible if DISH stock closes at or above $80 when March options expire.
Put Spread: Alternately, those traders looking to throw in with the analyst community would do well to consider a Mar $72.50/$77.50 bear put spread. At last check, this spread was offered at $2.03, or $203 per pair of contracts. Breakeven lies at $75.47, while a maximum profit of $2.97, or $297 per pair of contracts, is possible if DISH stock closes at or below $72.50 when March options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
