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JPMorgan's Top-Ranked Communication Stocks to Buy for April
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With the second quarter underway, and earnings right around the corner, many of the top firms that we cover on Wall Street are ranking and rerating companies in their coverage universe. With inflation a real concern going forward, and the market expecting at least two more interest rate hikes, it makes sense to own stocks that should do well under those conditions.
One sector that should perform well is the broader communications arena, that includes the tower companies, cable, satellite and the telecoms. The analysts at J.P. Morgan ranked their coverage universe for April, and we focused on the five of the top ranked stocks, some of which pay solid dividends. All are rated Overweight.
SBA Communications
This is the top play for this month at JPMorgan. SBA Communications (NASDAQ: SBAC) is the third largest U.S. wireless tower company, with approximately 25,000 towers spread across the United States, Canada and Latin America. The core business for SBA is leasing antenna space on its towers to various wireless service providers on a long-term basis.
The company also manages rooftop and tower sites for property owners under various contractual arrangements, and it has a large site development and construction division. JPMorgan sees the stock as cheap relative to its peers, and it doesn’t feel that increased AT&T spending for 2018 is factored in to current estimates.
The JPMorgan price target for the stock is $130, and the Wall Street consensus target is $130.47. The stock closed Monday at $119.55 a share.
CenturyLink
This is the largest of the rural local exchange carriers and is expected to continue get a large dose of government money to provide continuing internet service in rural areas. CenturyLink Inc. (NYSE: CTL) is a global communications, hosting, cloud and IT services company enabling millions of customers to transform their businesses through innovative technology solutions.
CenturyLink offers network and data systems management, Big Data analytics and IT consulting, and it operates more than 55 data centers in North America, Europe and Asia. The company provides broadband, voice, video, data and managed services over a robust 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network.
The company announced last year plans to sell its data centers and colocation business to a consortium led by BC Partners for $2.3 billion, which it will use in part to fund its planned tie-up with Level 3 Communications. JPMorgan feels the dividend is safe, and the stock is undervalued compared to its peers.
CenturyLink investors receive a gigantic 9.15 % dividend. JPMorgan has a $38 price target, while the consensus price objective is at $27.15. The shares closed trading on Monday at $23.60.
Charter Communications
This top cable giant is another JPMorgan favorite. Charter Communications Inc. (NASDAQ: CHTR) is a leading broadband communications company and the fourth-largest cable operator in the United States. It provides a full range of advanced broadband services, including Spectrum TV video entertainment programming, Spectrum Internet access and Spectrum Voice.
Spectrum Business similarly provides scalable, tailored and cost-effective broadband communications solutions to business organizations, such as business-to-business internet access, data networking, business telephone, video and music entertainment services and wireless backhaul.
Top Wall Street analysts have cited potential growth and strong free cash flow generation following the merger with Time Warner Cable and Bright House Networks as a huge positive. The merger proved time-consuming, but it was finally completed. Recently Wall Street was abuzz with rumors that telecommunication giant Verizon may attempt a mega-merger or purchase of the company, which would create potentially the largest U.S. wireless and internet provider. JPMorgan doesn’t feel the deal will happen, but the analyst expects continued operational momentum.
The JPMorgan price target for the stock is $375, and the Wall Street consensus price target for the stock is set at $358.60. The shares closed yesterday at $328.27.
Comcast
This broadcasting-related stock could have solid upside potential. Comcast Corp. (NASDAQ: CMCSA) is the largest U.S. provider of cable services, with over 22 million basic subscribers. It owns NBCU, which includes the NBC TV Networks, Telemundo, MSNBC, USA, SyFy, Bravo, E!, CNBC and several other cable networks, as well as Universal Films and Universal Theme Parks.
Comcast has invested in technology to build an advanced network that delivers among the fastest broadband speeds and brings customers personalized video, communications and home management offerings. JPMorgan revised its first-quarter estimates higher and also thinks the company could benefit from regulatory and potential tax relief.
Comcast investors are paid a 1.68% dividend. The $41 JPMorgan price target is less than the consensus price objective of $42.02. Comcast closed trading on Monday at $37.56.
T-Mobile
Some top Wall Street analysts believe this carrier should be bought on an increasing cash flow and valuation thesis. T-Mobile US Inc. (NYSE: TMUS) provides mobile communications services in the United States, Puerto Rico and the U.S. Virgin Islands. It offers voice, messaging and data services in the postpaid, prepaid and wholesale markets. It also provides wireless devices, including smartphones, tablets and other mobile communication devices, as well as accessories that are manufactured by various suppliers.
The company offers services, devices and accessories under the T-Mobile and MetroPCS brands through its owned and operated retail stores, as well as through its websites. T-Mobile also sells its devices and accessories to dealers and other third-party distributors for resale through independent third-party retail outlets and websites. It serves approximately 63 million customers.
The analysts think the company’s strong operational momentum should continue, and they like the company into the end of the spectrum auctions.
The JPMorgan price target is$71. The consensus target is $67.65, and shares closed most recently at $63.55.
All five of these companies make good sense for investors looking for steady growth and dependability. Given the big run in the markets, and with the first-quarter earnings reports on the way, it may be smart to buy partial positions and see how the reports look.
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