Market Overview

Will 2015 Be A Better Year For Telecom Stocks?

Will 2015 Be A Better Year For Telecom Stocks?
Related VZ
Barron's Picks And Pans: AT&T, Starbucks, State Street, Verizon And More
Sprint, T-Mobile Merger Looks More Likely As DOJ Calls For Just 3 Leading 5G Carriers
Jane's July Dividend Increases And Income Tracker - Retirement Accounts (Seeking Alpha)
Related T
Barron's Picks And Pans: AT&T, Starbucks, State Street, Verizon And More
M&Ain't: Several Of The Year's Biggest Mergers Face Uncertain Future
Dividend Sensei's Portfolio Update 48: The Best Way To Overcome Your Biggest Investing Problem (Seeking Alpha)

After a weak 2014, the “Big Four” telecom companies are looking to have a bounce-back year in 2015. A recent report by Morgan Stanley analysts indicates that shareholders of Sprint Corp (NYSE: S), Verizon Communications Inc (NYSE: VZ), T-Mobile US Inc (NYSE: TMUS), and AT&T Inc (NYSE: T) should keep expectations low for the upcoming year.

Growth Pressures

According to analysts, there are five key sources of growth pressure on the wireless side:

  • Aggressive competition among the “Big Four”
  • Total market saturation 
  • Smartphone saturation reaching 70 percent
  • A shift toward installment plans
  • Price wars

Saturation means that any growth by these telecom companies will need to come at the expense of the others. Aggressive pricing strategies aimed at luring customers, such as Sprint’s recent campaign targeted at Verizon and AT&T customers, will continue to be a factor in the future.

Lack Of Value Support

Analysts believe that the telecom stocks are appropriately valued at current levels.

With the rising interest rates likely coming soon, analysts believe the appeal of owning telecom stocks for their dividends and share buyback plans will start to fade.

Stock Picks

Morgan Stanley analyst Simon Flannery explains that Verizon is the top pick among the big four because of its valuation and dividend, and says Sprint is the weakest of the four because of its weak positioning and high churn rate.

“We generally prefer the towers (Crown Castle, SBA Communications) and Canadian carriers (Rogers, BCE) given their more attractive industry structure and fundamentals.”

Morgan Stanley has Overweight ratings on T-Mobile, Crown Castle International Corp (NYSE: CCI), Verizon, SBA Communications Corp (NASDAQ: SBAC), Rogers Corp (NYSE: ROG) and BCE Inc (NYSE: BCE).

They have Underweight ratings on Sprint and United States Cellular Corp (NYSE: USM).

Latest Ratings for VZ

Jul 2018BairdMaintainsNeutralNeutral
Jul 2018Credit SuisseInitiates Coverage OnOutperform
Jun 2018Goldman SachsUpgradesNeutralBuy

View More Analyst Ratings for VZ
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas Reiteration Analyst Ratings Trading Ideas Best of Benzinga


Related Articles (BCE + CCI)

View Comments and Join the Discussion!

Wedbush Heads To The Shopping Malls On A Pre-Holiday Finding Mission

Top Performing Industries For December 22, 2014