The Zacks Analyst Blog Highlights: Morgan Stanley, DIRECTV, Netflix, Comcast and DISH Network

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Dec 12, 2013, 09:30 ET

CHICAGO, Dec. 12, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include theMorgan Stanley (NYSE:MS-Free Report), DIRECTV (Nasdaq:DTV-Free Report), Netflix Inc. (Nasdaq:NFLX-Free Report), Comcast Corp. (Nasdaq:CMCSA-Free Report) and DISH Network Corp. (Nasdaq:DISH-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Why Should You Stay Invested in Morgan Stanley?

Shares of Morgan Stanley (NYSE:MS-Free Report) have recorded a solid year-to-date return of 58.1%. Organic growth, strong capital deployment activities and strategic acquisitions drove the strong price appreciation. Hence, keeping its shares in your portfolio should not disappoint.

However, we are not confident about these factors translating into further strength down the road, as there will be pressure on the company's bottom line due to the sluggish economic recovery and stringent regulatory requirements. Hence, we discourage fresh addition of Morgan Stanley shares to your portfolio.

Why This Stance?

Morgan Stanley's third-quarter 2013 earnings per share beat the Zacks Consensus Estimate. Results were driven by rise in the top line and lower-than-expected expenses. However, reduced client activity and fall in market volumes for all products led to a decline in Fixed Income & Commodities sales and deterioration in trading results.

Amid the challenging macroeconomic environment, Morgan Stanley enjoys a competitive edge over its peers due to consistent growth in its core Institutional Securities' franchise. Moreover, in the last few quarters, the company undertook restructuring activities to reduce balance sheet risks and maintain stable earnings. Further, the acquisition of Morgan Stanley Wealth Management (MSWM) is expected to reduce the company's dependence on volatile trade revenues.

However, Morgan Stanley's top-line growth is expected to be sluggish in the next few quarters owing to its increased cost structure. Moreover, significant exposures in structured investment vehicles, commercial mortgage-backed securities and commercial real estate sector might limit earnings growth, given the prevailing economic uncertainty.

Additionally, when it comes to estimate revision, the trend was mixed. Over the last 30 days, the Zacks Consensus Estimate for 2013 declined nearly 1% to $2.04 per share while it remained almost flat at $2.54 per share for 2014. Hence, Morgan Stanley now carries a Zacks Rank #3 (Hold).

DIRECTV to Offer Online Services?

Recently, DIRECTV (Nasdaq:DTV-Free Report), the largest satellite TV operator in the U.S., hinted at introducing online video streaming services. However, the initial offering will be at a much smaller scale than the existing service providers Netflix Inc. (Nasdaq:NFLX-Free Report), Hulu and uTube.

Also, the company will initially offer this service for selected contents. Shifting from satellite TV network to IP streaming via broadband network will boost the company's operating income and free cash flow in the long term.

The U.S. pay-TV market is extremely competitive. In addition to the traditional Cable TV and satellite TV operators, telecom giants are also offering fiber-based high-speed video services. In contrast, low-cost online video streaming services have also become very popular especially when the economy is still reeling under fluctuations.

We believe that DIRECTV also needs to restructure its business model and the decision to start online streaming service is one such step. DIRECTV currently has a Zacks Rank #3 (Hold).

DIRECTV has also decided to enhance its video offerings with next-generation 4K ultraHD video services, which provides contents with horizontal resolution on the order of 4,000 pixels.

The use of horizontal resolution technology is a qualitative shift from the previous HDTV technology which offers vertical resolution. The new technology will significantly upgrade video and sound quality.Comcast Corp. (Nasdaq:CMCSA-Free Report) is also conducting research and development for 4K resolution.

DIRECTV has also planned to launch two more satellites in 2014 and 2015, which we believe will further improve service quality. Rounds of rumor in the industry circle suggest a possible merger between the largest two satellite TV operators, namely, DIRECTV and DISH Network Corp. (Nasdaq:DISH-Free Report). DISH has accumulated a significant size of wireless spectrums.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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