After the close of trading on Tuesday June 13, a federal judge gave the green light for AT&T Inc. (NYSE:T) to buy Time Warner Inc (NYSE:TWX) for a whopping $85.4 billion. One question for investors is, does it make Dish Network Corp (NASDAQ:DISH) a buy? DISH stock climbed after the announcement and many are hoping it’s a sign of things to come.
Why would Dish be a buy after the deal? With a market cap of just $15 billion, some wonder whether it could be an M&A target. After all, AT&T bought DirecTV for almost $60 billion just a few years ago.
Now that it has bought TWX, some investors are surely wondering if others will look to implement a similar, albeit potentially debt-filled strategy. If so, Dish stock’s 50% decline over the last 12 months surely makes the strategy cheaper.
AT&T-Time Warner Merger
Let’s back up a little bit and digest what just happened. The AT&T-Time Warner deal has been on hold for some time now. Regulators argued that approving the deal would decrease competition and hurt consumers.
Those who were in favor of the deal said it was the only way for companies to compete with the quickly rising power of Netflix, Inc. (NASDAQ:NFLX), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) via YouTube and others.
A lot was riding on this deal and what the ruling on it would be. Approving it would seemingly give the green light to a number of other companies either in the M&A market now or looking to make a move.
This includes Sprint Corp (NYSE:S) and T-Mobile Us Inc (NASDAQ:TMUS) in their $26.5 billion merger. It also includes Comcast Corporation (NASDAQ:CMCSA) looking to outbid Walt Disney Co (NYSE:DIS) for most of the assets at Twenty-First Century Fox Inc (NASDAQ:FOX, NASDAQ:FOXA).
In fact, the day after the T-TWX deal was approved, CMCSA submitted a big offer for FOX.
Even certain healthcare and pharmacy stocks climbed higher on increasing M&A odds. With these deals finding approval, investors are becoming more optimistic other deals will follow.
So where does Dish stock fit in all of this? The hope is that its assets are enough to bring someone else to the table too. Specifically, there’s been a buying frenzy in media, be it in distribution or content.
While its Sling TV hasn’t had the most robust start to the cord-cutting world, the product has had some pretty decent traction (now over 2.2 million subs). That and Dish’s traditional business could be attractive to someone in the $20 billion to $22 billion range.
Valuing Dish Stock
Remember that DISH was trading for almost $70 per share last year and briefly cracked above $80 in 2016. So shares are down a lot over the past few years.
Given its decline in growth though, that’s no surprise. While Dish will see a pop in earnings this year, estimates call for a 15% decline next year. That goes along with consecutive years of revenue decline, with forecasts calling for a 5.2% drop this year and a 3.9% drop in 2019.
Shares trade at just 12.5 times this year’s estimates, far from a premium. But given the low valuations throughout the media sector, some might wonder why they should chase DISH.
Dish has some interesting assets, with Sling TV and plenty of spectrum. At $15 billion, it doesn’t have a massive market cap either, so it is a potential M&A target for someone that thinks they can better leverage Sling TV. But as I’ve said in the past, I would rather own CMCSA, DIS and FOX than others in the media space.
Trading Dish Stock
At least Dish stock has some support nearby. On the 10-year weekly chart above, $30 is clearly an important level. If it fails, I’d hate to see where DISH falls to. So where do interested buyers step in?
On the chart below, you’ll also see downtrend resistance and the 50-day moving average coming into play. Investors can either buy a breakout over this level or wait for a pullback to channel support. Below $30 and I would be worried about DISH stock.