AT&T Fallout: Pay-TV Industry Could Lose 1 Million Subscribers – Investor's Business Daily

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Cable TV companies and media stocks sold off on renewed worries that pay-TV cord-cutting is accelerating after AT&T (T) preannounced Q3 financial numbers, including the loss of 90,000 video subscribers.

“We believe cord-cutting continues to gain steam as streaming builds momentum,” said UBS analyst John Hodulik in a report. He estimated that the pay-TV industry will lose about 1 million subscribers in the third quarter compared with 325,000 in the same quarter last year, based on recent management commentary.

AT&T fell 3.7% to 36.76 on the stock market today. AT&T also blamed recent hurricanes for video subscriber losses. Comcast (CMCSA), which in early September warned of video subscriber losses, shed 3.3% to 36.19.

Comcast had attributed some of its video subscriber weakness to aggressive promotions launched by AT&T’s landline “U-verse”-branded TV service. Analysts say AT&T’s DirecTV satellite TV service likely suffered the bulk of its subscriber losses in the third quarter.

Shares in satellite broadcaster Dish Network (DISH) fell 4.3% to 49.43 on Thursday. While AT&T bought DirecTV for $49 billion in 2016, analysts say Dish has had trouble finding a suitor amid continued subscriber losses.

Both AT&T and Dish have launched internet video services. AT&T said it added 300,000 online DirecTV Now subscribers in the third quarter, offsetting some of the traditional pay-TV losses. However, both AT&T and Dish garner less profit from internet services than traditional pay TV, analysts say.

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UBS estimates that Dish’s Sling service has 1.8 million subscribers and DirecTV Now 760,000. YouTube, the video website of Alphabet’s (GOOGL) Google, launched a livestreaming TV service in early 2017.

So did Hulu, a joint venture of 21st Century Fox Entertainment (FOXA), Walt Disney (DIS), Comcast and Time Warner (TWX). UBS estimates that YouTube has 180,000 subscribers; Hulu has 175,000.

Shares in Charter Communications (CHTR) fell 1.7% to 358.95 on Thursday. Altice USA (ATUS) slipped 2.5% to 25.21.

Worries over accelerated cord-cutting also hit media stocks. That’s because they garner per-subscriber programming fees from cable-TV and satellite-TV companies. Disney fell 1.3% to 97.23, CBS (CBS) slipped 0.4% to 56.84, and Discovery Communications (DISCA) shed 1.3% to 19.73.

AT&T also disclosed that wireless customers upgraded to new smartphones at a slower rate in the September quarter vs. the year-earlier period, sparking speculation over tepid demand for Apple‘s (AAPL) iPhone 8.

Apple stock, though, edged up 0.3% to 157.08.


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