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Telefonica (TEF) Surges 10.6% YTD: Will the Uptrend Continue?

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Telefonica (TEF - Free Report) witnessed strong momentum this year, with shares gaining 10.6% year to date compared with the sub-industry’s rise of 5.7%.

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

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. The company’s miMovistar portfolio continues to gain traction in Spanish markets. In Spain, Bluevia plans to increase its fiber coverage to 5 million by 2024.

The company pursues strategic collaboration to expand its footprint. In June, Telefonica announced that it is extending its partnership with F5 to launch the managed service, Web Application Defense, which leverages the F5 Distributed Cloud Platform.

The company reported an impressive performance in the first quarter of 2023. Its 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.

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 90%, respectively, in the past 60 days, reflecting analysts’ optimism regarding the company’s prospects.

Also, the company has an impressive VGM Score of B. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth.

Despite solid demand, the company is prone to several risks. The company operates in various places throughout the world, which makes it exposed to unfavorable forex dynamics.

Other Stocks to Consider

Some other top-ranked stocks in the broader technology space are Badger Meter (BMI - Free Report) , InterDigital (IDCC - Free Report) and Woodward (WWD - Free Report) . InterDigital sports a Zacks Rank #1 (Strong Buy), while Badger Meter and Woodward carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Badger Meter’s 2023 earnings per share (EPS) has increased 1.1% in the past 60 days to $2.72.

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 80.3% in the past year.

The Zacks Consensus Estimate for InterDigital’s 2023 EPS has increased 249% in the past 60 days to $8.08. The company’s long-term earnings growth rate is 13.9%.

InterDigital’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 170.9%. Shares of IDCC have rallied 51% in the past year.

The Zacks Consensus Estimate for Woodward’s fiscal 2023 EPS has increased 3.8% in the past 60 days to $3.58.

WWD’s long-term earnings growth rate is 13.5%. Shares of WWD have gained 14% in the past year.

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