Hughes Shares Tumble 10% After Analyst’s Downgrade

Hughes Electronics Corp. shares fell as much as 10% after an analyst cut his rating when the No. 1 U.S. satellite-television company’s subscriber growth fell in May for the first time this year.

Shares of the General Motors Corp. unit fell $8.88 to $98.12, after earlier touching $96. The owner of satellite-TV company DirecTV was downgraded to “hold” from “buy” by analyst Timothy O’Neil at Wit SoundView.

The company on Tuesday said DirecTV added 130,000 customers in May for a total of 8.6 million, 24% more than added a year earlier but 50,000 less than in April. Although Hughes is on track to meet O’Neil’s estimate of 430,000 new customers in the second quarter, competition is likely to keep DirecTV from beating forecasts, he said.

The El Segundo-based company is facing challenges from telephone companies such as BellSouth Corp., which plans to sell satellite service next year, O’Neil said in a report. The introduction of digital TV by cable companies, offering hundreds of channels and better picture quality, also is hurting Hughes, he said.

The slower rate was expected, said Merrill Lynch & Co. analyst Tom Watts,

“Absolute numbers of new subscriber additions are still very strong and still significantly above last year,” said the analyst, who rates the stock a “buy,” in a report, targeting its share price at $145.

DirecTV said that it signed record numbers of new customers in March and April in part because of free installation offers it did not continue in May. The company said June numbers should improve because of special promotions, offering two months of free programming, that began Memorial Day weekend.

In addition, DirecTV said that it would get a bump in June from an equipment and installation discount extended to more than 40,000 Time Warner cable customers in Los Angeles, Houston and New York after the operator pulled the ABC television network for 36 hours in early May.