Investors Will Love Dish Stock For This

For a company whose main business continues to struggle, Dish Network (DISH) has fared well in stock markets this year. The stock has gained about 40% year-to-date, putting it ahead of Comcast (CMCSA) stock, which has returned 30%. Meanwhile, Charter Communications (CHTR) and Altice USA (ATUS) stocks have fared better this year, returning 66% and 56%, respectively.

Shrinking pay-TV market troubles Dish

What do Dish, Comcast, Charter, and Altice have in common? They’re all pay-TV providers struggling in a shrinking market amid cord-cutting. The US pay-TV market generated $106 billion in revenue at its peak in 2015, according to Digital TV Research. However, the market is shrinking. Digital TV Research expects pay-TV revenue to drop to $70 billion by 2024.

The shrinking US pay-TV market reflects clearly in Dish’s financial results. Dish’s annual revenue fell 5.4% YoY (year-over-year) to $13.6 billion in 2018 from $14.4 billion in 2017, and by a similar degree between 2017 and 2016. In the third quarter, Dish’s revenue fell almost 7.0% YoY to $3.17 billion.

Dish stock jumps as the company heads where growth is happening

While the pay-TV market is shrinking under cord-cutting pressure, the wireless industry is expanding. On average, US wireless market revenue has been growing 0.6% annually and is set to reach $283 billion this year. Additionally, the arrival of 5G connectivity is expected to stimulate growth in the US wireless market. An Ericsson study shows North America is leading the world in adopting 5G.

The good news for Dish investors is that the company is heading where the growth is. In July, Dish cut a deal with T-Mobile (TMUS) and Sprint (S) to rescue their merger agreement. The deal involves Dish taking up several assets that T-Mobile and Sprint will divest to satisfy regulatory requirements. Dish stock jumped around 1.0% the day it announced the T-Mobile–Sprint deal.

The assets could jumpstart Dish’s wireless business, generating over $3.3 billion in new revenue for Dish annually. Dish could put that new inflow toward developing its 5G network.

Dish to take a charted path

Can a pay-TV company easily transform itself into a wireless provider? Comcast, Charter, and Altice have shown it’s possible—each of them now run wireless operations. Therefore, Dish will be taking a charted path in its wireless bid.

Dish’s wireless bid has been a major source of investor optimism. They see it as a potential end to Dish’s struggles in the pay-TV market.