EchoStar: HDTV Plus Satellite Equals Profits

It's been more fun to watch television than invest in the industry, but EchoStar Communications Corp., owner of the Dish Network satellite service, could be an entertaining addition to your portfolio.

The stock (symbol DISH) looks like a good deal. At $28, it trades at 15 times analysts' earnings estimate of $1.90 a share for the next four quarters. That's reasonable for a company in a high-growth industry that's expected to post 25% annual earnings growth for the next three to five years.

Prudential Equity Group analyst Katherine Styponias says the stock is worth $35. She predicts that EchoStar's customer base and earnings -- and, therefore, its stock price -- will get a charge because the company is ready to launch a high-definition version of Dish sometime in 2006. This will give EchoStar a better shot at the free-spending, higher-income viewers who have preferred Dish's arch-rival, DirecTV, or a cable network such as Comcast or Time Warner. DirecTV already has an HD product, but EchoStar is known to price its TV packages aggressively and gain market share. Moreover, Styponias says, DirecTV has hurt itself by imposing strict credit requirements on would-be customers, literally sending tens of thousands of people to EchoStar at a time when most consumers have money to spend.

Finally, although it's impossible to know if there's anything to this, EchoStar could be a takeover target. Founder, chairman and chief executive Charles Ergen and his wife (also a company officer) own 53% of the common stock and control almost all of the voting stock. He denied two weeks ago that ATT wants to buy EchoStar. But satellite TV looks like a good fit for many telecom giants.

--Jeffrey R. Kosnett