As expected, the last two weeks have been relatively quiet from a market cap change perspective (Fab Five +$106B over the last week, and the Telco Top Five +$1B). Apple, and Google are each showing recent signs of strength (together +$149 billion this past week), but, given the summer turnup on AI-related stocks and continued pessimism on cable’s ability to keep their broadband subscriber base from fiber, the song basically remains the same from the July/August earnings releases.
What does September hold? Last Friday, the Bureau of Economic Analysis released a fairly robust picture of US economic activity (article here). Personal outlayrs increased $110 billion in July with $35 billion of that on “motor vehicles and parts.” We read that as end of model year sales and perhaps the realization of some tariff-related pent up demand from April-June.
That same report also indicated that consumers are continuing to save (personal savings totaled $985 billion in July). This leads us to believe that some of the recent tax changes may just be starting to take effect and that recipients of these benefits aren’t delaying consumption.
This and additional reports led our friends at the Atlanta Fed (here) to change their 3rd quarter GDP reading to 3.5 percent (from 2.5 percent the week prior). Note: As quickly as this revision goes up, it has also shown a history of going down. In the explanation of the reasoning for the upward revision, however, the Fed cited “the contribution of net exports to third-quarter real GDP growth increased from -0.36 percentage points to 0.59 percentage points.” There were signs (backed by shipping data) that many firms were trying to get alead of the second wave of tariffs, and we believe that this revision reflects that that activity was temporary.
Everyone will be searching for clues about the economy from next Friday’s jobs report. We believe that it will continue to show surprising growth (thanks to blue-collar job gains), offset by increasing losses in the federal government employee base. For an interesting assessment of where the job picture is for each state, the Bureau of Economic Analysis recently released their unemployment figures. As we have long held, it’s critical to also track the “total employed” figure as opposed to merely focusing onthe unemployment rate. Faster growing states like Texas and Florida are seeing marked improvements in their base due to disproportionate increases in employment (which in the case of Texas results in more consumption tax receipts as Texas does not have a personal income tax).
The one report we will focus on in early September is the Congressional Budget Office’s monthly budget review (recent data here). We anticipate that August figures will drop on September 11th or 12th and will show remarkable tarrif revenues (and also continued government spending).
In the telecom world, AT&T’s $23 billion purchase of 600 MHz and 3.45 GHz spectrum from Echostar was the main event. We listened to their call on the topic, but it’s pretty clear cut: AT&T will put the spectrum to work right away and use their Internet Air product to reduce copper losses until they can get fiber to those homes. No doubt that Ma Bell has their priority lists ready to go today. Good news for folks like CellSite solutions who have divisions that support AT&T upgrades (CellSite Solutions is currently focused on the Pacific Northwest). Maybe there is some impact on satellite operator broadband projections, but we aren’t sure that the quantity is meaningful (e.g., a few thousand homes converted per quarter from an early spectrum lease). Overall, it’s good news for AT&T, and, if there is a loser, it could be a rural cable company like Cable One, Mediacom, or Altice (again, we do not think it’s material).
The BEAD state-by-state awards are piling up, however, and that poses better news for the cable industry as they are winning more territory than expected. Here is the latest chart from New Street Research (they and Telecompetitor have the best trackers on the topic – TC’s is here):
While Comcast has won $601 million, the combination of Frontier + Verizon is at $408 million and the “other” category is at $5.3 billion. The impact of recent rule changes appears to be limited to handful of mostly Western states (to date, LEO is the recipientof about 4% of total grants). Good news for taxpayers with lower overall expenditures, and there will likely be fiber alternatives for some of these homes as fiber (and fixed wireless access) networks continue their natural expansion.
Finally, there was an excellent article published by Mark Gurman this week in Bloomberg outlining Apple’s plans to revamp the iPhone and other products over the next several years. Rather than summarixe this rather lengthy tome, we will include the full link here.
Please note that the attached spreadsheet contains all of the updates that were discussed in last week’s Brief as well as the latest publicly disclosed cable MVNO statistics (you can unhide the rows in the cable MVNO tab to get even more detail). Hope the remainder of the Labor Day holiday is restful and enjoyable.
