We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Telefonica (TEF) Downgraded to Sell, Lags Industry Mark
Read MoreHide Full Article
On Dec 14, Spanish telecom behemoth Telefonica SA (TEF - Free Report) was downgraded by a notch to a Zacks Rank #4 (Sell).
The downgrade was a result of the company’s below-par performance with respect to the industry in the past one year. Also, a highly leveraged balance sheet and fierce competition in the domestic and Latin American markets acted against Telefonica.
Troubles
Shares of Telefonica have underperformed the Zacks categorized ‘Diversified Comm Services’ industry’s performance on a year-to-date basis. The stock lost 19.89%, wider than the industry’s decline of 3.01% over the same period.
Domestic competition poses a major hurdle as the unbundled local loop (ULL) regulation is compelling Telefonica to make its network available to alternative providers. The company also faces intense competition in Brazil, the largest contributor to its Latin American revenues.
Moreover, Telefonica was recently downgraded by International credit rating agency, Moody's Investors Service, commonly referred to as Moody's. The downgrade follows Moody's warning that Telefonica needs to reduce its debt by the end of 2016. Moody’s downgraded the guaranteed subsidiaries of Telefonica from Baa2 to Baa3, and preferred stock ratings from Ba1 to Ba2 and short-term ratings to Prime-3 from Prime-2. The fallout of the company’s IPO plans for its infrastructure division – Telxius – was a major setback. Telefonica also attempted to establish its U.K. wireless unit, O2 UK, as an IPO to lessen its debt burden. Notably, O2 UK is a dominant wireless player in the U.K. along with 3UK and Vodafone Group Plc. (VOD - Free Report) . Notably, the company has a debt-laden balance sheet.
Few Positives
Telefonica continues to benefit from the launch of video services in several Latin-American markets, widespread adoption of broadband and data services, pricing revision, network enhancement and strategic collaborations, continued focus on organic growth, portfolio optimization and the digital world. Acquisition of E-Plus has positioned it as the largest mobile service provider in Germany in terms of subscriber count.
Telefonica’s recent activities also bode well for the company’s long-term growth prospects.
In Dec 2016, Mexican telecom behemoth America Movil SAB (AMX - Free Report) entered into an agreement with its closest rival Telefonica to offer nationwide mobile roaming service to the latter.
In Nov 16, Viacom Inc. entered into an agreement with Telefonica to acquire Television Federal S.A. (Telefe). The acquisition will be executed by the company’s Viacom International Media Networks (“VIMN”) division and is expected to be value accretive as it will boost the company’s presence in Argentina. Telefonica believes that the deal is in line with its asset portfolio management strategy.
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Telefonica (TEF) Downgraded to Sell, Lags Industry Mark
On Dec 14, Spanish telecom behemoth Telefonica SA (TEF - Free Report) was downgraded by a notch to a Zacks Rank #4 (Sell).
The downgrade was a result of the company’s below-par performance with respect to the industry in the past one year. Also, a highly leveraged balance sheet and fierce competition in the domestic and Latin American markets acted against Telefonica.
Troubles
Shares of Telefonica have underperformed the Zacks categorized ‘Diversified Comm Services’ industry’s performance on a year-to-date basis. The stock lost 19.89%, wider than the industry’s decline of 3.01% over the same period.
Domestic competition poses a major hurdle as the unbundled local loop (ULL) regulation is compelling Telefonica to make its network available to alternative providers. The company also faces intense competition in Brazil, the largest contributor to its Latin American revenues.
Moreover, Telefonica was recently downgraded by International credit rating agency, Moody's Investors Service, commonly referred to as Moody's. The downgrade follows Moody's warning that Telefonica needs to reduce its debt by the end of 2016. Moody’s downgraded the guaranteed subsidiaries of Telefonica from Baa2 to Baa3, and preferred stock ratings from Ba1 to Ba2 and short-term ratings to Prime-3 from Prime-2. The fallout of the company’s IPO plans for its infrastructure division – Telxius – was a major setback. Telefonica also attempted to establish its U.K. wireless unit, O2 UK, as an IPO to lessen its debt burden. Notably, O2 UK is a dominant wireless player in the U.K. along with 3UK and Vodafone Group Plc. (VOD - Free Report) . Notably, the company has a debt-laden balance sheet.
Few Positives
Telefonica continues to benefit from the launch of video services in several Latin-American markets, widespread adoption of broadband and data services, pricing revision, network enhancement and strategic collaborations, continued focus on organic growth, portfolio optimization and the digital world. Acquisition of E-Plus has positioned it as the largest mobile service provider in Germany in terms of subscriber count.
Telefonica’s recent activities also bode well for the company’s long-term growth prospects.
In Dec 2016, Mexican telecom behemoth America Movil SAB (AMX - Free Report) entered into an agreement with its closest rival Telefonica to offer nationwide mobile roaming service to the latter.
In Nov 16, Viacom Inc. entered into an agreement with Telefonica to acquire Television Federal S.A. (Telefe). The acquisition will be executed by the company’s Viacom International Media Networks (“VIMN”) division and is expected to be value accretive as it will boost the company’s presence in Argentina. Telefonica believes that the deal is in line with its asset portfolio management strategy.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>