The Fab Five continued their post-earnings announcement gains last week, with each stock participating in the $270 billion rise. Over the last two weeks, $440 billion in market cap gains have been recorded. Of special note, Google has grown $284 billion over this period of about 2/3rds of the total gain for the group.
These gains have been driven by two primary factors: 1) the anticipation of increased productivity, adoption, and addressable market from increased use of artificial intelligence (AI); and 2) the uncertainty surrounding viability of lower capitalized alternatives. As we discussed in last week’s Brief, the cash balances and low/ negative net debt levels for each Fab Five stock act as a security blanket of sorts to many institutional investors.
The Telco Top Five did not fare as well last week, and the individual share performances are beginning to diverge (-$13 billion for the week, -$17 billion for the last two weeks). Comcast is the largest telecom company in the US by market capitalization (China Mobile now holds the top spot globally), edging out T-Mobile this week. So far in 2023, AT&T and Verizon are down a combined $29 billion, offset by Comcast’s $26 billion gain. Charter and T-Mobile are basically unchanged in 2023.
These returns look pretty good compared to the second tier telecom returns. Over the last year, the market capitalization of Lumen is down 79%, Altice USA down 75%, Dish down 67%, TDS down 60%, and Cable One down 44%. These benchmarks are likely impacting private valuations of companies such as Brightspeed, Windstream, and Mediacom.
There were two big announcements in the telco world this week. First, Cox announced that they would be purchasing the remaining part of Unite Private Networks (they purchased the majority position from Ridgemont Equity Partners in 2016) and combining the operations into their other major commercial holding, Segra Communications (announcement here). This is a logical step and allows Cox to have a holding focused on national commercial needs. Good news for customers, but another competitor for the already struggling units at Lumen, AT&T, and Verizon (and, to a lesser extent, Zayo).
The other big announcement was Verizon’s myPlan consumer plan restructure, which de-risks the financial implications of projected content bundle price changes while attempting to provide greater choice and clarity. In the process, Verizon has attempted to reintroduce the value of 5G millimeter wave and Hotspot. We anticipate few migrations from existing plan holders and think that the plans create a longer activations process for new customers (except Apple fans). Here’s a link to the current plan structure – judge for yourself.
The Memorial Day Sunday Brief will likely be released on Saturday and will focus on three recent letters: a) Amazon CEO Andy Jassey’s annual letter; b) JP Morgan CEO Jamie Dimon’s annual letter; and c) Berkshire Hathaway CEO Warren Buffet’s annual letter. All three are excellent reads.
File is below. Have a terrific week!