Market Overview

Morgan Stanley Remains Cautious On Telecom Services Sector, Expects In-Line 2Q Results

Morgan Stanley Remains Cautious On Telecom Services Sector, Expects In-Line 2Q Results
Related AMT
Argus Says American Tower Stands Above Its Peers In The Wireless Tower Space
FFO Is The 'EPS' Of Real Estate Investment Trusts
Related CCI
Worst Performing Industries For October 5, 2016
Crown Castle's Quarterly Results Support Barclays View That The Company Can Deliver Returns

Ahead of the release of quarterly numbers by telecom services companies, Morgan Stanley said it remains cautious of the sector, blaming the caution on secular growth trends, intense competition and regulatory risk.

Macro And Micro Conditions

The firm noted that the sector benefited from macroeconomic conditions, as lower interest rates drove traders in droves to defensive stocks. Additionally, the USD strength is also supporting the space. These duo of factors, according to Morgan Stanley, has led to outperformance of telecom services stocks in the year-to-date period.

However, on the micro level, Morgan Stanley sees risks of slow growth, competitive pressure and regulatory uncertainty. The firm expects in-line results from these companies due to the EIP adoption benefiting wireless margins. Morgan Stanley also expects low upgrade rates ahead of an iPhone refresh.

The Sector As A Whole

The firm also said it is keeping a tab on the regulatory calendar, given that the 600 Mhz auction proceeds to the next stage and the FCC's stance on Special Access, Set Top Box reform, privacy and net neutrality. The brokerage added that it is paying close attention to the U.S. presidential elections, which will determine the fiscal and regulatory programs of the next administration. The company also sees burgeoning promotional activity ahead of the back to school season.

Related Link: Morgan Stanley's 5 Questions For Telecom Stocks This Earnings Season

Specific Names

While remaining overweight on telecom infrastructure stocks, including the three tower companies, namely American Tower Corp (NYSE: AMT), Crown Castle International Corp (NYSE: CCI) and SBA Communications Corporation (NASDAQ: SBAC); fiber providers Level 3 Communications, Inc. (NYSE: LVLT) and Zayo Group Holdings Inc(NYSE: ZAYO); CyrusOne Inc (NASDAQ: CONE) and Communications Sales & Leasing Inc (NASDAQ: CSAL), Morgan Stanley also recommends Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) among large carriers.

Citing concerns about broadband competition and the need for higher capital expenditure, Morgan Stanley said it is turning more negative on RLEC companies. Specifically, the brokerage downgraded Frontier Communications Corp (NASDAQ: FTR) and Centurylink Inc (NYSE: CTL).

Earnings Releases

Earnings dates of telecom services Ccmpanies in Morgan Stanley's coverage universe:


  • American Tower: July 28, before market
  • SBA Communications: July 29, after market
  • Zayo: Mid-September
  • CyrusOne: August 1, before market


  • Frontier Communications: August 1, after market
  • Raxspace Hosting, Inc. (NYSE: RAX): August 8, after market

Full ratings data available on Benzinga Pro.

Did you like this article? Could it have been improved? Please email with the story link to let us know!

Latest Ratings for AMT

Sep 2016SunTrust Robinson HumphreyInitiates Coverage onBuy
Aug 2016Argus ResearchMaintainsBuy
Aug 2016CitigroupMaintainsBuy

View More Analyst Ratings for AMT
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings Long Ideas Short Ideas Previews Reiteration Analyst Ratings Tech


Related Articles (AMT + CCI)

View Comments and Join the Discussion!