Lat-Am = 25% of DirecTV’s value
March 28, 2013
By Chris Forrester
US-based pay-TV operator DirecTV has seen its rating upgraded by analysts at Guggenheim in advice to clients to a ‘BUY’ from neutral, and a price target of $64. This is well ahead of the average consensus target price of just $57, and ahead of the current price of around $56.
However, it also emerged that the market is also now valuing DirecTV’s fast-growing Latin American subscribers – and their further growth potential – as representing about 25 per cent of the broadcaster’s value. “The company has been able to grow its subscriber base in Latin America by offering higher quality video that gives it a competitive edge, the success of its middle-market focused programming packages and the growing popularity of prepaid products. The company has done well in terms of understanding the needs of the market, which are different from those in the US in many ways. We believe that these factors will continue to drive its growth in the near term. Long term growth will be broadly driven by the fact that pay-TV penetration is still low in Latin America, and therefore, there is significant potential to expand. We forecast that DirecTV’s subscribers in Latin America will increase to 20+ million in long term (five+ years’ time frame),” said one analyst.
DirecTV had 3.3 million Latino subs in 2007. That has grown to 10.3 million (as at December 31st last year). Additionally, DirecTV’s minority position in Sky Mexico could be added to those numbers but the Mexican investment is not consolidated into the core company’s figures.