EchoStar Communications (DISH): A change in the wind

Firms in the communications sphere seem to be constantly readjusting themselves, to find the most successful balance between size and efficiency. The most recent move involves an Englewood, Colorado outfit that is leaning toward a spin-off. There is also talk that the company may be an acquisition target.

EchoStar Communications (NASDAQ: DISH) offers satellite digital television to customers in the United States. The firm's DISH Network delivers programming to more than 13 million subscribers and subsidiary EchoStar Technologies provides dishes, set-top boxes and other digital equipment to both the DISH Network and others. EchoStar has formed alliances with Internet service providers and voice communications companies to offer combined services. Among those partners are EarthLink (NASDAQ: ELNK), Qwest Communications (NYSE: Q) and Sprint Nextel (NYSE: S).

The stock popped last week, on good news for the firm and a subsequent rumor. The first jump was on Tuesday, when the Board decided to pursue a possible separation of its businesses into two distinct publicly traded companies. EchoStar's consumer pay-TV business would continue to operate as the DISH Network and most of the firm's other technology assets would be spun-off. Shareholders would receive pro rata ownership interests in each of the new entities. Then, on Thursday, the brokerage community renewed speculation that DISH might be acquired by AT&T (NYSE: T). Oppenheimer seemed to think the move was reasonably certain. Kaufman Brothers later viewed such a transaction as possible.

That popped the shares again and now they appear to be initiating a consolidating of the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend the stock with two "strong buys," four "buys," 12 "holds" and four "sells." Analysts see a 40% growth rate, through the next year. The DISH Price to Sales ratio (2.00), Price to Cash Flow ratio (10.85), Price to Free Cash Flow ratio (28.41) and EPS Growth rate (31.58%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 43% of the outstanding shares. The stock is one of those used to calculate the Nasdaq 100 Index. Over the past 52 weeks, it has traded between $31.73 and $49.69. A stop-loss of $40.75 looks good here. Note that the firm is expected to release third quarter results in early November.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.