EchoStar Rallies As Citi Upgrades To Buy From Sell

EchoStar (SATS) shares are trading higher this morning after Citigroup analyst Jason Bazinet this morning raised his rating on the stock to Buy from Sell, while boosting his price target to $21, from $13.50. The stock closed Monday at $15.97.

Bazinet offered five reasons for his upgrade of EchoStar, which makes set-top boxes:

• The company has $15 a share in cash and securities, and no debt. Basically, you get the business for nothing.


• The company generated $12 million in free cash flow in the first half, reflecting $118 million in cash from operations and $106 million in capex. The positive cash flow reduces the risk of cash position erosion over time.


• Dish Network (DISH) is indemnifying SATS for any damages related to the ongoing TiVo (TIVO) patent infringement case over $5 million, effectively capping the company’s liability to about 6 cents a share.


• DISH, the company’s primary customer - the two companies were formerly one company - is adding subscribers again, a trend which he contends bodes well for future revenue growth at SATS.


• He also thinks there is the potential for new contract wins, noting that the company has gone 18 months without a material new win.

SATS today is up $2.13, or 13.3%, to $8.10.