Dish Network Corp. (DISH:US), the second- largest U.S. satellite-TV provider, gained the most in more than four months after a Wells Fargo & Co. analyst said investors are being overly bearish on the stock.
Dish advanced 4.6 percent to $28.90 at in the close in New York for the biggest one-day gain since March 7. The Englewood, Colorado-based company has gained 1.5 percent this year.
There are reasons to “debunk” the bear case on Dish, Marci Ryvicker, a New York-based analyst for Wells Fargo, wrote in an investor note. Some investors are concerned Chairman Charlie Ergen will spend billions of dollars building a wireless network instead of returning cash to shareholders, a scenario Ryvicker says won’t happen.
“We went through every single earnings transcript since fourth-quarter 2010 to provide investors comfort” that Ergen “is not looking to build a wireless network,” wrote Ryvicker. “It is clear to us that there is no intention to fund a wireless build solo.”
Dish is more likely to forge a partnership with an existing wireless company than sell the spectrum or build a network itself, Ergen said in a conference call last quarter. The company is “talking to everybody” to best position itself, he said.
Investors also shouldn’t fear Dish will pay $2.5 billion in damages to Cablevision Systems Corp. (CVC:US) and AMC Networks Inc. (AMCX:US) in its breach-of-contract lawsuit over Voom, a collection of high- definition channels that were supposed to air on Dish until the satellite provider decided not to carry them.
While a judge ruled Dish destroyed evidence in the case, “there is plenty of negotiating leverage” to reach a settlement, Ryvicker wrote. Dish stopped carrying all of AMC’s networks earlier this month.
Dish’s valuation should include “hidden value” in the form of its spectrum holdings, acquired from bankrupt TerreStar Networks Inc. and DBSD North America Inc. for about $3 billion, Ryvicker wrote.
Ryvicker reiterated her outperform rating on the shares, although she lowered her valuation range to $47 to $49 from $54 to $56 “to account for a shakier economy.”
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