Morgan Stanley analyst Benjamin Swinburne downgraded his rating on shares of EchoStar Communications to "equal weight" from "overweight," citing the growing threat DirecTV poses to EchoStar's DISH satellite television network.
"We continue to believe that EchoStar is well-positioned for high-definition programming expansion," Swinburne wrote in a note to investors Tuesday.
The analyst added that EchoStar has a defendable subscriber base as the price leader in the market, and has a management team that focuses on the long term.
Even though shares of both EchoStar (nasdaq: DISH - news - people ) and DirecTV (nyse: DTV - news - people ) have outperformed in an increasingly competitive industry, Swinburne said further upside from EchoStar's fundamental performance alone will likely be limited to 5% to 10%.
The analyst lowered his price target on EchoStar to $33 from $36, reflecting rising year-over-year churn levels at DISH that could result in a deceleration of net customer growth and, in turn, revenue growth.
Swinburne said DirecTV's ramp to meaningful free cash flow in 2008 is less risky than EchoStar's DISH network, given DirecTV's clearer capital spending plan.
And, DirecTV's high-definition program offerings will likely exceed EchoStar's and the rest of the cable industry, giving it a competitive advantage that could be used to drive pricing power, according to the analyst.
Morgan Stanley currently rates DirecTV at "overweight."
http://www.forbes.com/markets/2006/05/17/echostar-directv-0517markets06.html
"We continue to believe that EchoStar is well-positioned for high-definition programming expansion," Swinburne wrote in a note to investors Tuesday.
The analyst added that EchoStar has a defendable subscriber base as the price leader in the market, and has a management team that focuses on the long term.
Even though shares of both EchoStar (nasdaq: DISH - news - people ) and DirecTV (nyse: DTV - news - people ) have outperformed in an increasingly competitive industry, Swinburne said further upside from EchoStar's fundamental performance alone will likely be limited to 5% to 10%.
The analyst lowered his price target on EchoStar to $33 from $36, reflecting rising year-over-year churn levels at DISH that could result in a deceleration of net customer growth and, in turn, revenue growth.
Swinburne said DirecTV's ramp to meaningful free cash flow in 2008 is less risky than EchoStar's DISH network, given DirecTV's clearer capital spending plan.
And, DirecTV's high-definition program offerings will likely exceed EchoStar's and the rest of the cable industry, giving it a competitive advantage that could be used to drive pricing power, according to the analyst.
Morgan Stanley currently rates DirecTV at "overweight."
http://www.forbes.com/markets/2006/05/17/echostar-directv-0517markets06.html
