Telecom & Wireless
Stock Winners After Intense Wireless and Pay-TV Competition
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The mere fact that wireless has become ubiquitous is easy to see. Just look around, everybody from the 14-year-old kid to the 75-year-old grandmother has a cell phone, and in many cases, a smartphone. One would think that some companies must be printing money. That fact is, the competition is intense, and there will be some big winners going forward.
A new research report from UBS points out that U.S. wireless competition remained very intense in the second quarter, with AT&T aggressively repricing their base customers to fend off competition. The other big providers countered with national pricing promotions. Broadband was likely strong as well, with the major cable providers improving, enabling cable to garner close to 90% of the flow share.
Demand is insatiable for wireless, broadband, content and more. The problem is competition is intense, which keeps pricing and margins thin sometimes. The companies that are succeeding are dominating their space, or at least attempting to. One thing is for sure, technology and innovation will keep the sector growing and moving for years to come.
UBS has cut through the clutter to find the stocks still attractive at these levels. Here are their top stocks rated Buy.
American Tower Corp. (NYSE: AMT) has also been a momentum trader’s dream stock and is a top tower stock for 2014. Last year the company bought 4,500 wireless sites in Brazil and Mexico from NII Holdings for $811 million. The company is a leading independent owner, operator and developer of wireless and broadcast communications real estate.
American Tower currently owns and operates approximately 68,000 communications sites in the United States, Brazil, Chile, Colombia, Costa Rica, Germany, Ghana, India, Mexico, Panama, Peru, South Africa and Uganda. Investors are paid a 1.5% dividend. UBS is bullish on the tower sector and has a $97 price target on the stock. The Thomson/First Call consensus price is $98.11. Shares closed Wednesday at $90.87.
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CenturyLink Inc. (NYSE: CTL) is the third largest telecommunications company in the United States and is recognized as a leader in the network services market by technology industry analyst firms. The company is a global leader in cloud infrastructure and hosted IT solutions for enterprise customers.
CenturyLink provides data, voice and managed services in local, national and select international markets through its high-quality advanced fiber optic network and multiple data centers for businesses and consumers. Investors are paid a strong 5.9% dividend. The UBS price target is $39. The consensus is posted at $33.80. CenturyLink closed trading Wednesday at $36.59.
Comcast Corp. (NASDAQ: CMCSA) is one of the top consumer cable and entertainment names on Wall Street. The largest cable company in the United States continued its push to be a top entertainment name. The UBS analysts think 2014 will be another banner year for entertainment stocks, with continued strong pricing power, advertising spending growth and new digital platforms.
Comcast shareholders are paid a 1.7% dividend. The UBS price target is $58. The consensus target is $60.73, and Comcast closed Wednesday at $54.73.
Crown Castle International Corp. (NYSE: CCI) bought the rights to AT&T’s wireless broadcast towers in the fall of 2013 for $4.85 billion. When wireless service providers sell broadcast towers, they typically lease back space from tower operators so they can continue to offer their services without interruption. This is a win-win for the purchaser.
Crown Castle offers significant wireless communications coverage to all the top 100 U.S. markets and to substantially all the Australian population. Crown Castle owns, operates and manages approximately 1,800 wireless communication sites in the U.S. and Australia. Investors are paid a 1.9% dividend. UBS has an $88 price target, and the consensus figure is $88.14. The stock closed Wednesday at $74.17.
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Gogo Inc. (NASDAQ: GOGO) is a leading global aero communications service provider. Using Gogo’s exclusive products and services, passengers with Wi-Fi enabled devices can get online on more than 2,000 Gogo equipped commercial aircraft.
Gogo’s in-flight connectivity partners include Aeromexico, American Airlines, Air Canada, AirTran Airways, Alaska Airlines, Delta Air Lines, Japan Airlines, United Airlines, U.S. Airways and Virgin America. In-flight entertainment partners include Aeromexico, American Airlines, Delta Air Lines, Japan Airlines, Scoot and U.S. Airways. In addition to its commercial airline business, Gogo has more than 6,200 business aircraft outfitted with its communications services. UBS has a $23 price target on this intriguing small-cap name. The consensus is set at $22.25. Shares closed Wednesday at $17.03.
Intelsat S.A. (NYSE: I) offers various on-network services, including transponder services; managed services that combine satellite capacity, teleport facilities, satellite communications hardware, and other ground facilities to provide managed and monitored broadband, Internet, video and private network services to customers; and channel services primarily used for point-to-point bilateral services to telecommunications providers.
The UBS price target for the stock is $28, and the consensus objective is at $25.63. IntelSat closed Wednesday at $18.70.
T-Mobile US Inc. (NYSE: TMUS) continues to be surrounded by the rumors, chatter and outright clamor over its potential merger with Sprint. Half of Wall Street likes the deal, and the other half thinks it is horrible and will never get regulatory approval. That makes for a battleground.
The UBS team thinks that the company could emerge as the fastest growing wireless company in the United States, with 7.0% service revenue growth as subscriber additions are slow but remain solid. The UBS price target is $34 and the consensus target is $35.21. Shares closed Wednesday at $33.03.
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Time Warner Cable Inc. (NYSE: TWC) is in the final stages of being gobbled up by Comcast and soon may drop off the UBS list. The company provides various residential services that comprise video services, including video on demand, digital video recorder and start over and look back services; high-speed data services that include communication tools and personalized services, such as email, PC security, parental controls and online radio services; and voice services that comprise local and long distance calling throughout the United States, Canada and Puerto Rico.
Time Warner Cable investors are paid a 2.1% dividend. UBS has a $148 price target, and the consensus target is $156.20. The stock closed Wednesday at $149.77.
Wednesday’s top analyst upgrades and downgrades included shares of Alcoa, BP, Broadcom, Garmin, Gigamon, KKR, Marvell, KLA-Tencor, Potash, Zillow and many more.
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