Bes Stocks To Buy 2014, Best Stocks For 2014: Competition will force the issue

Sunday, January 1, 2012

Competition will force the issue

Television viewers now spend an additional four-and-a-half-hours on the Internet and 59% surf the Internet and watch TV at the same time.?

For subscription TV companies like Dish Network (Nasdaq:DISH), that��s bad news. After all, why pay for programming when you can get content online for free? The challenge will get worse if Google (Nasdaq:GOOG) actually gets into the TV business via its fiber optic network in Kansas City, as some analysts believe.

The competition among online, satellite and fiber-optic video from telecom providers like Verizon (NYSE:VZ) already has been fierce and is taking a toll on many pay-TV providers�� subscription base.? Consider DISH, which reported a 30% rise in earnings on Monday, but lost 111,000 subscribers during the third quarter.? And that earnings increase was largely due to its Blockbuster acquisition earlier this year.???

But viewers aren��t taking the axe to the cord en masse just yet.? According to ABI Research, only about 10% of subscribers don��t subscribe to a pay TV service. ��In a relatively fragmented connected consumer electronics market, the pay-TV package is still the best means to get the widest range of content,�� ABI��s Jason Blackwell said.? ��Some programming, such as sports and premium content is still pay-TV centric, even with TV Everywhere initiatives.��

So at least for the near term, viewers are unlikely to pull the plug on subscription TV.? But some providers will experience an erosion of market share because of competition in the sector.? Here are some likely winners and losers:

Winners:

DirecTV (NYSE:DTV):? DirectTV was a big winner in the last quarter, adding 327,000 customers, likely driven by its sports programming. DTV now boasts nearly 20 million subscribers. At $46.11, DTV is trading nearly more than 13% below its 52-week high of $53.40 in July. ! DTV has a price-to-earnings growth (PEG) ratio of 0.49, suggesting the stock is very undervalued.

Verizon:?? Verizon��s Fios service is picking up steam �C it added 130,000 subscribers in the quarter and now has a base of 4 million subscribers. At $37.12, Verizon is trading nearly 5% below its 52-week high of $38.95 in March. Verizon pays a dividend yield of nearly 5.3%.

AT&T (NYSE:T). AT&T added 176,000 new subscribers �C fewer than in recent quarters, but any gain is good news.? The company now boasts 3.6 million subscribers.? At $29.22, AT&T is trading more than 8% below its 52-week high of $31.94 in May. The stock pays a current dividend yield of nearly 5.9%.

Losers:

DISH Network:? The Blockbuster acquisition, which DTV got on the cheap at auction, buys a little time for the provider to refine its strategy.? Not only are the lost customers an issue, but the average subscriber bill fell by more than 2% in the quarter.? DISH now has slightly fewer than 14 million subscribers.? At $23.49, DISH is trading nearly 28% below its 52-week high of $32.56 in July.?

Time Warner (NYSE: TWC).? Time Warner lost 126,000 subscribers in the last quarter, leaving it with a base of just over 12 million customers.? At $61.40, TWC is trading more than 24% below its 52-week high of $80.86 in July. The current dividend yield is 3%.

Comcast (Nasdaq:CMCSA).? Comcast is still the Big Dog in the industry, in first place with 22.4 million subscribers.? However, it lost 165,000 subscribers in the quarter.? At $22.36, Comcast is trading nearly 18% below its 52-week high of $27.16 in May.? It pays a current dividend yield of nearly 1.93%.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.

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