The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (January 20)

by | Jan 21, 2023 | TSB

Market recovery? Economic soft landing? Value reset? Sideline cash? January always has a way of bringing out the buzzwords and catch phrases. The market appears to have concluded in the last two weeks that the a global recession will be mild, and in the United States perhaps even milder. As a result, growth expectations are slowly being adjusted upwards and markets are adjusting.

The Fab Five gained an additional $138 billion (or one AT&T) over the last week, bringing their two-week rebound to $528 billion. Three of the Fab Five stocks are already up double digits in 2023: Amazon (+$135 billion or 16%), Google (+$137 billion or 12%), and Meta (+$51 billion or 16%). Microsoft, has completely recovered from $112 billion in equity losses attributable to analyst downgrades earlier in the month. Even Apple, who suffered the fewest percentage losses of any of their Fab Five peers in 2022, is up 6% or $126 billion in 2023. The global outlook is brightening ahead of year-end earnings and 2023 earnings forecasts.

The Telco Top Five is holding on to a strong start. After the first week of trading, the cumulative value of the Telco Top Five increased $47 billion. As of Friday’s close, values were up $43 billion. While there appears to be some pulling back in Verizon, each of the other share prices is holding steady or even rising.

Of particular note is Charter, who suffered their largest one-day equity capitalization loss in the corporation’s history on December 14, 2022. Sixteen percent of the value of the company was erased in one day. As of Friday (roughly 25 trading days after the event), the stock price has recovered to pre-announcement levels. That’s the impact of high levels of sideline cash.

Earnings will be in focus this week with Verizon announcing on Tuesday and AT&T Wednesday. Both releases and corresponding conference calls will occur prior to the market open. Based on our Apple backlog analysis, we think Verizon will have a lot of expedite/ supply chain costs to amortize (see last week’s Brief for a full analysis) but had to do so in order to show positive phone net adds in their consumer unit. AT&T’s story will center around fiber additions – here’s the link to their Q3 results in case you need a pre-read.

More to come in next week’s Brief. File is below.

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