The conclusion in a report late today from Craig Moffett is a big change for the MoffettNathanson Research founder — and could weigh on both satellite distributors tomorrow. Moffett has been Wall Street’s leading evangelist for a DirecTV-Dish Network merger: In June he upgraded both companies, urging investors to buy their shares, in the belief that Dish Chairman Charlie Ergen would pursue a “spectacularly lucrative” deal with DirecTV after he failed to gain control of Sprint or an influential stake in wireless broadband company Clearwire. The idea swept through Wall Street, especially after the company chiefs said they wouldn’t rule it out.

But Moffett just conceded defeat. He downgraded both companies to “neutral” and lowered his price targets (by 7.4% to $63 for DirecTV and 8.5% to $43 for Dish). The reason: Ergen’s passion to create a wireless service “shows no sign of cooling.” He continues to amass rights to wireless airwave spectrum, and the more he buys “the less feasible it becomes for Dish to sell its trove.” Federal officials might consider it anti-competitive if wireless giants AT&T or Verizon tried to buy so many licenses. Antitrust officials also might object if Ergen tried to cut a deal with DirecTV, Moffett now says. He was struck last month by the Justice Department’s decision to fight a merger deal between US Airways and American Airlines. That “sends a strong signal as to how the current Administration thinks about consolidation in national industries used by a broad swath of consumers,” Moffett says. He had hoped that Dish and DirecTV would overcome antitrust objections — especially for rural viewers who’d be left with just one TV option if the companies merged — by offering to lower prices and use Dish’s spectrum to offer wireless broadband services. But Moffett says that the companies and their advisors are “close” to concluding that “this does not seem like a favorable environment” to try a merger. That being the case, “there’s just not a whole lot to get excited about when considering the prospects” for DirecTV and Dish, Moffett says. DirecTV faces decelerating growth in Latin America, and at Dish “the U.S. business is simply bad…and it’s getting worse.”