The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (December 2)

by | Dec 3, 2022 | TSB

November ended strong, with all eyes focused on the effect of increased interest rates on stock performance. 2-Yr Treasury note yields are still around 4.3% which implies an after-tax rate of about 5.6-5.7% to be matched by equities (usually in the form of dividends). Since the Fab Five dividends are relatively low (if they are paid at all), investors need conviction that the underlying equity values are going to grow. (Apple’s current dividend yield is below 1% and Microsoft’s is in the low 1%s of their current stock price; no dividends are paid on the remaining Fab Five equities). While the balance sheets of each of the Fab Five continue to be strong (very little leverage with most still having negative net debt), the question becomes how to grow profits without material equity dilution and an increasingly tough regulatory environment.

Four of the Fab Five bounced back this week, summing up to a $133 billion cumulative gain. The Telco Top Five held on to the gains made over the Thanksgiving week, but still have three of the five stocks with over $45 billion in year-to-date equity losses (AT&T’s equity loss includes the WarnerMedia spin, so depending on how you value that, the remaining company is flat to slightly higher for the year). The clear winner for 2022 has been T-Mobile, and they are continuing to extend market share gains with the aggressive “four for $100” promotion still in effect.

As our parallel Sunday posts have described in detail, iPhone 14 Pro and 14 Pro Max shortages have hurt the size of the switcher pool. It’s likely to impact not only T-Mobile (although they seemed to have found a way to attract a different base with the aforementioned offer), but also cable.

File is below. iPhone availability charts will be out by the start of the Chiefs-Bengals AFC Championship rematch tomorrow afternoon.

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