The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (September 9)

by | Sep 10, 2022 | TSB

Greetings from the Midwest.  The Fab Five had a decent week (+$211 billion) and the Telco Top Five was also up $6 billion.  Apple’s announcement (to be covered in next week’s Brief) was positively received, and orders for the iPhone 14 )and Apple Watch) lineup are expected to be strong.  Microsoft had the strongest weekly performance (+$63 billion) but every Fab Five stock gained. 

Meta announced their upcoming virtual reality conference, called Connect, will be held on October 11.  There is wide anticipation that their next generation of VR hardware, codenamed Project Cambria, will be the primary focus.  More on the conference expectations in this CNBC article.   Their stock moved higher on the conference announcement.   

Meanwhile, as the NFL season kicks off this weekend, rumors of the Sunday Ticket bidding war are continuing to circulate.  Despite reports in late July from The New York Times that Google/ YouTube was also a contender, we think this is still an Apple vs. Amazon race.  Apple dropped no hints at their conference (we expected some indication) and Amazon kicks off their Thursday Night Football exclusive coverage in a few days (great article detailing their plans from Bloomberg here). 

There were two other big news items involving T-Mobile this week.  First, they announced that Cogent would be purchasing the legacy Sprint wireline assets for $1 (link to announcement here).  They also announced a commitment to purchase $700 million in IP transit services from Cogent in two stages.  We will have more commentary on the transaction next week, but we view this as a very positive move for both companies (Internet backbone consolidation for Cogent and EBITDA improvement for T-Mobile).   

The second item, an $14 billion share buyback authorization, is what moved the stock this week.  In a short but sweet SEC document (see link in previous paragraph), the company announced their intentions.  There is no triggering event here outside of the continued healthy cash flows that T-Mobile is experiencing.  If market volatility increases (and, by the inclusion of at least $3 billion of repurchases allowed through the end of 2022, they might be anticipating such an event), they are ready to act.  We believe that a broad-based stock buyback is premature and that the company faces many investment opportunities that make more sense than a buyback at $145.70/ share.  But it never hurts to have the option should October be extra spooky. 

Spreadsheets are below.  Have a terrific week and Go Chiefs! 

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