A day after its much anticipated Analyst Day in Las Vegas May 10, Dish Network stock fell as much as 20.5% (down $4.46 per share) to $17.29 each in early trading Wednesday, a result of what some analysts said were remaining questions about the company and its wireless future.
Dish shares have been hammered since it reported disappointing Q1 results May 6 — the stock is down 35% since that date and has fallen 45% for the full year — but many analysts believed that questions regarding the company’s planned 5G wireless service launch would be answered during the Analyst Day. Unfortunately, many left the four-hour May 10 event with more questions than ever before.
In a research note, Barclays Group media analyst Kannan Venkateshwar wrote that instead of offering concrete milestones for the wireless business, which investors could use to “crystallize a valuation framework,” Dish execs instead concentrated on “highlighting network architecture, which is important but something that Dish has been talking about for a while now and has been a topic of conversation more broadly for a few years.”
Dish stock closed at $17.46 per share on May 11, down 19.7% or $4.29 each.
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Venkateshwar said Dish did offer some numbers — it set a goal of 30 million to 40 million wireless customers, suggesting it would take a percentage of market share in the low double-digits — but declined to say how long it would take to achieve those results. Dish management also said it expected to generate more than $6 billion in enterprise revenue from private 5G networks, according to the analyst, although again the timeline was unclear.
“If this is true then the upside for legacy operators is being significantly underestimated,” Venkateshwar wrote.
What was missing from the presentations was any mention of Dish’s capital structure, all the more complicated now that the company is free cash flow negative, mainly due to the cost of the wireless build, Venkateshwar wrote. Dish reported consolidated free cash flow, or cash flow after capital expenditures are made, of negative $191 million in Q1. That compared to free cash flow of positive $729 million in the prior year and analysts’ consensus expectations of positive $197 million for the period.
In an email message, MoffettNathanson senior analyst Craig Moffett said the Analyst Day left attendees with more questions than answers.
“I think the consensus coming out of the meeting was that it is simply not credible to suggest that they will get 10% market share of the retail market just for showing up, without revealing anything truly differentiating about their service,” Moffett wrote, adding that the big question in the enterprise segment is why a business would pick licensed spectrum from Dish — for a fee — over free unlicensed spectrum (Wi-Fi).
“And perhaps more pointedly, it’s still not clear why Enterprise customers will choose Dish over Verizon, nor why Dish will get, as they suggested during the Q&A at the end, half of the economics of every Enterprise deal when they are partnered with a lead systems integrator, cloud provider, multiple software vendors, and multiple equipment providers,” he continued.
But the biggest disappointment may have been the lack of any new developments regarding partnerships for the wireless service.
“[T]here was obviously a hope among the bulls that they would announce a major partnership — Amazon was obviously the hope — that might include some answer to the question of how they will finance their growth,” Moffett wrote.
Investors have struggled with the economics of Dish’s wireless plans, with the company insisting they can build a state-of-the-art 5G network (using ORAN technology) for $10 billion and analysts insisting that it will cost much, much more.
In Q1, signs that costs are ramping up significantly were evident as capital spending for the network — across both the retail wireless and 5G network — was up nearly 10 times to $597 million from $62 million in the same period in 2021. ■
