RBC Gets More Positive on Wireless Carriers

By Lee Jackson Published Jul 1, 8:20AM EDT

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One area that is starting to garner some pretty serious attention recently is the wireless carriers. Needless to say, market anxiety and a rising VIX always will move investors there as they perceive it as somewhat defensive, but some very positive trends are starting to emerge and analysts are taking note.

In a new research note, RBC makes price changes across the board in the industry as the firm is perhaps starting to see what other analysts did last week when Merrill Lynch and UBS took a big step and upgraded AT&T from Neutral to Buy. Barclays also upped the stock to an Overweight Rating from Equal Weight.

While the RBC analyst keeps the firm’s rating on the stocks where they were, telecom and wireless carrier investors are no doubt happy to finally see some renewed interest in a segment that has a ubiquitous product and user base, but always seems to struggle with margins.

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AT&T Inc. (NYSE: T) leads off the price increases at RBC. While the company lowers the postpaid adds for the second quarter, RBC like many across Wall Street are becoming increasingly bullish on the Mexico business and the completion of the DirecTV deal, both of which look to add solid future revenues. RBC keeps the stock at a Sector Perform rating but raises the price target from $33 to $37. The stock closed Tuesday at $35.52.

Sprint Corp. (NYSE: S) also gets a boost in the price target at RBC. The analysts see the company actually adding to the net postpaid additions and they raise their estimates from 35,000 to 160,000. They also change the average revenue per user, or ARPU, estimates to better reflect ongoing strength in tablets and late-June migrations from Virgin/Boost to Sprint postpaid. The stock stays at a Sector Perform rating, but the price target goes from $5 to $6. Sprint shares ended Tuesday at $4.56.

T-Mobile US Inc. (NYSE: TMUS) is a wireless carrier that the RBC team is very bullish on. The analysts cite stronger postpaid customer additions that were driven by positive momentum in phones and tablets and aided by relatively measured competition from peers. They also see the company continuing to gain market share and show improving margins. Plus, T-Mobile remains a very viable takeover candidate. The RBC rating for the stock is Outperform, and the price target goes from $39 to $41. The stock closed Tuesday at $38.77.

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While it always seems on the surface that something has to give in the wireless arena, the same players are always standing, and the price wars and attrition/churn seem to stay in place. It would not be a surprise to finally see some sector consolidation in the next year.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.