The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (August 12)

by | Aug 13, 2022 | TSB

Greetings from the City of Fountains where we will likely experience our fourth 100+ degree day of the summer. If only our sports teams could be as hot as the prairie winds… at least the Chiefs pre-season starts today.

The chart below (and spreadsheet attached) show the changes in market capitalization for the Telco Top Five and the Fab Five. This was another good week for the markets, an August vacation rally of sorts, driven by lower than expected inflation growth at both the consumer (end user) and producer (intermediate goods) level.

One interesting note buried in the CPI details was the steep year-over-year decline in smartphone prices (down 20%). Wireless and residential landline telephony services are keeping a lid on annual CPI changes, with wireless at 0.0% growth from July 2021 to July 2022 and residential telephone services up 3.4%. Internet services were also up a muted 1.7% annually.

One more data point since many of you commented on the inflation data discussed in the Brief last week – more than 66 million homes are heated using natural gas, and this commodity is not falling like gasoline. Here’s the data from the U.S. Energy Information Administration and the latest natural gas chart courtesy of CNBC. Natural gas prices are historically more volatile, but they really have a ways to go to be remotely close to year ago levels.

For the week, the Fab Five recouped about $300 billion in value with gains across each stock and just over one third coming from Apple. These five stocks have lost about $1.36 trillion in value this year through August 12, which is about half of the loss level from June. 27% of the current loss is attributable to Meta/ Facebook, but every stock remains in the red. We have also included the Fab Five net debt calculations with a beginning of 2022 and 2Q 2021 levels for comparability.

The Telco Top Five also had a decent week, with Comcast briefly cresting $40 per share. Every stock (except AT&T, which was flat) gained this week, with Comcast leading the group’s recovery. We will have more why we think Disney’s recently announced price hikes may not port to increased cable prices in next week’s Brief. As noted last week, it’s interesting to see how close market capitalizations are between Verizon, T-Mobile, and Comcast.

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