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Telefonica (TEF) Gains 16.8% YTD: Will the Trend Continue?

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Telefonica (TEF - Free Report) witnessed strong momentum this year, with shares gaining 16.8% year to date compared with the sub-industry’s rise of 9.4%.

Telefonica provides mobile and fixed communication services in Europe and Latin America. The company continues to invest heavily in deploying and transforming its network to provide excellent connectivity in all dimensions, capacity, speed, coverage and security.

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Catalysts Behind the Price Surge

Let’s delve deeper to unearth the factors working in favor of this Zacks Rank #2 (Buy) stock.

The increase in share price is driven by the company’s robust financial performance. The company came up with an impressive performance in the first quarter of 2023.

The company’s quarterly total revenues increased 6.7% year over year to €10,045 million. Organic revenues (aggregating 50% of Virgin Media O2 joint venture results) grew 4.9% year over year to €11,497 million.

The company’s performance benefited from strong revenue growth across Telefonica Brazil and the Telefonica Tech business segments. In the first quarter, revenues in Brazil grew 17.5% to €2,282 million, mainly due to the momentum in digital services and the progressive update on tariffs.

Telefonica Tech’s revenues increased 43.5% year over year to €429 million owing to the robust performance of managed & professional services and own platforms. The Cyber business unit outperformed estimates, with first-quarter Internet of Things revenues expanding by double digits.

The company’s 5G network provides almost 85% of the population in Spain with advanced mobile Internet services, streamlining the entire communications infrastructure of the country. In the first quarter, the company’s 5G coverage reached more than 2100 towns and cities in the UK and about 58 cities in Brazil.

In February, the company announced that it had formed a joint venture with Deutsche Telekom, Orange and Vodafone. The partnership is focused on developing a platform based on digital marketing to help consumers, advertisers and publishers.

In 2023, the company expects low-single-digit growth in revenues and OIBDA and a CapEx-to-sales ratio of up to 14%.

The Zacks Consensus Estimate for 2023 and 2024 revenues has increased 34.6% and 68.2%, respectively, in the past 60 days, reflecting analysts’ optimism regarding the company’s prospects.

Other Stocks to Consider

Some other top-ranked stocks in the broader technology space are Dropbox (DBX - Free Report) , Badger Meter (BMI - Free Report) and Blackbaud (BLKB - Free Report) . Dropbox and Badger Meter presently sport a Zacks Rank #1 (Strong Buy), whereas Blackbaud currently holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dropbox’s 2023 earnings has increased 10.1% in the past 60 days to $1.85 per share. The long-term earnings growth rate is anticipated to be 12.3%.

Dropbox’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of DBX have gained 7.5% in the past year.

The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has increased 4.7% in the past 60 days to $2.69 per share.

Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have surged 75% in the past year.

The Zacks Consensus Estimate for Blackbaud’s 2023 earnings has increased 9.3% in the past 60 days to $3.75 per share.

Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 10.4%. Shares of the company have jumped 13.4% in the past year.

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