Amir Rozwadowski of Barclays noted that even though the U.S. telecom stocks aren’t immune to the global market troubles, they can provide a relatively safe haven for investors. The firm took a look at which telecom stocks whose earnings capabilities seem best positioned to be comparatively defensible during this period of market uncertainty. “Overall, the S&P 500 Telecom Services sector has outperformed the S&P 500 over the last month,” Rozwadowski wrote. The firm believes the best performers include Sprint, Zayo and T-Mobile. Rozwadowski also thinks that high levels of recurring revenue and generally better-than-market dividend yields often play a significant role in attracting investor interest during time of market volatility. This is why they consider AT&T, T-Mobile, Zayo and the tower companies to be the best companies to monitor.
The firm noted that while AT&T’s initial mid-term earnings outlook from its Analyst Day may have disappointed higher end expectations, they remain encouraged by the potential top- and bottom-line synergy opportunities from the DirecTV deal setting the company up for a positive numbers revision cycle. Rozwadowski explained that T-Mobile’s fundamentals alone back their Overweight thesis premised on market share gain/margin expansion/cash flow inflection. “On the tower names, we believe spending budgets should get increasingly looser in ’16 setting all up for a healthy demand cycle not reflected in their reduced valuations,” the analyst explained. And for Zayo, the firm is encouraged on the company’s positioning to capitalize on structural tailwinds associated with the rising demand for bandwidth infrastructure.
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