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Dycom Sinks 10% on Rumor of Google Slowing Fiber Roll-Out

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Shares of telecommunications infrastructure company Dycom Industries Inc. (DY - Free Report) plunged almost 10% in yesterday’s trading session, reportedly on rumors that Alphabet’s (GOOGL - Free Report) Google unit is curtailing its roll-out of fiber-optic broadband lines to homes in the United States.

Over the past few days, media reports that Google (which is rumored to be a major client of Dycom) is pulling back from fiber-based broadband in favor of a wireless solution, have been doing rounds.

Per these reports, Google has put its plans to deliver fiber-based high-speed Internet in the cities of San Jose, Mountain View and Palo Alto on hold, and is instead looking to use wireless solution to install broadband.

The reports insist that Google is favoring aerial installation. In fact, Business Insider discovered a Google filing with the FCC asking for permission to expand tests of its wireless broadband technology to several U.S. cities (including the three Silicon Valley locations named above).

It seems that some investors believe the news to be a sign of future demand. In fact, shares of Dycom have been on a sharp downtrend since last Friday.

DYCOM INDS Price and Consensus

DYCOM INDS Price and Consensus | DYCOM INDS Quote

However, the fact remains that even if the rumors are true and Google is actually a big client of Dycom’s, the latter has much bigger clients who remain committed to their fiber outlay. Dycom has a highly concentrated client base, among which the biggest ones, i.e. AT&T, Inc. (T - Free Report) , Comcast Corporation (CMCSA - Free Report) , Verizon and Centurylink contributed about 56% of revenues in fiscal 2015.

Based in North Palm Beach, FL, Dycom provides specialty contracting services in the U.S. and Canada. The company offers engineering services like underground and buried fiber-optic design.

According to the company, network operators are increasingly deploying fiber optic cable technology deeper into their networks and closer to consumers and businesses. Dycom is well positioned to reap significant benefits from the accelerating fiber spending environment.

The company is particularly benefiting from extensive deployment of 1-Gigabyte wireline networks by major industry participants. Surging demand for 1-Gigabyte deployments from several large customers, huge investments in wireline networks, cable capacity projects and the ongoing Connect America Fund II project will likely drive significant expansion in Dycom’s market share.

We believe that Dycom’s business stands to benefit greatly from proliferating demand for network bandwidth and mobile broadband and other positive industry trends.

Dycom presently carries a Zacks Rank #3 (Hold).

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