A Closer Look At Dish Network’s Valuation
Dish Network (NASDAQ:DISH) is the fourth largest Pay TV provider in the U.S. behind Comcast, DirectTV, and Charter. The company offers Pay-TV services under the DISH and Sling brand. Pay-TV providers have been struggling with subscriber losses, driven by cord cutting and the increasing popularity of over-the-top (OTT) streaming services from companies such as Netflix (NASDAQ:NFLX), Amazon (NASDAQ: AMZN) and Hulu. Consequently, Dish Network saw its subscribers decline from 14.1 million in 2013 to 13.2 million in 2017.
We have summarized our forecasts for Dish Network’s fundamental value in an interactive model based on the expected fiscal 2018 results. You can modify assumptions such as changes in expected segment revenue or EBITDA margins to see how they impact the company’s value. The model shows the key steps in identifying Dish Network’s valuation sensitivity to changes in its segment revenues. We detail how changes in revenue or segment EBITDA margin impacts total EBITDA, which then impacts enterprise value (assuming a constant EBITDA multiple).
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We expect Dish Network to generate over $14 billion in revenues in 2018, and earnings of about $1.8 billion. Our revenue forecast of about $14.2 billion represents a modest year-on-year decline. Of the total expected revenues in 2018, we estimate $14.1 billion from the subscription-related business and over $100 million from equipment sales. In 2017, Dish Network lost approximately 284,000 net Pay-TV subscribers compared to the loss of approximately 392,000 net Pay-TV subscribers during the same period in 2016. We expect the company to continue to see subscriber losses for 2018 which, coupled with pressure on average revenue per user (ARPU), will negatively impact Dish’s revenues in 2018. However, the company continues to offer “skinny bundles” to lure customers back to its Pay TV services through Sling TV, which could offset some of the secular pressure.
Dish Network’s stock price has already declined more than 50% since the beginning of 2018. We have maintained our long-term price estimate for the company at $40, which around 20% ahead of the current market price. Our forecasts for the company are summarized in our interactive dashboard. If you have a different view, you can modify various inputs to see how updated inputs impact the company’s valuation and share links to scenarios created on our platform.
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