DIRECTV Group (DTV)

DIRECTV (DTV - Analyst Report) is set to continue generating healthy free cash flow and earnings growth, with reduced cap ex requirements, healthy ARPU, and vigorous growth in its Latin American operations.

The company's HD lead should defend its market share, bolster ARPU, and help stem decelerating subscriber growth. We think the HD rollout with the RBOCs as partners will defend DTV's market share against cable s ability to offer video, voice and data ("triple play"), which together with recently tightened credit standards, have been impeding subscriber growth.

Longer-term, we view the IP-TV roll-outs by AT&T and Verizon a serious threat, but one that won't be fully realized for several years.

Near-term, we expect satellite and cable TV will be relatively defensive recession investments, suffering less subscriber attrition in the recession than other forms of entertainment, and DIRECTV in particular should benefit from its recent efforts to weed out its lower-end customers most likely to churn.