Shares in telecom stocks AT&T and Verizon Communications kicked off 2024 with gains as technology shares and the Nasdaq index again pulled back. Both T stock and VZ stock underperformed in 2023 and 2022 but they may fare better if there's a market rotation out of tech stocks.
KeyBanc Capital Markets on Wednesday upgraded VZ stock to outperform from sector-perform. KeyBanc analyst Brandon Nispel expects Verizon's consumer business to rebound.
"Wireless industry competitive intensity being low makes us want more wireless exposure," he said in a report. Nispel added: "Verizon should show better postpaid phone net add performance."
On the stock market today, T stock rose a fraction to 17.27 in morning trading. VZ stock climbed 1.2% to 39.37, moving into a buy zone. Shares in T-Mobile U.S. gained 1% to 163.55.
AT&T stock rose 2.8% on Tuesday, while Verizon stock rose 3.1%. TMUS stock climbed nearly 1%.
However, longtime telecom analyst Craig Moffett, co-founder of MoffettNathanson, remained cautious on the 2024 outlook for telecom stocks.
Telecom Stocks: Investors Bottom Fishing?
"I wouldn't judge too much from a single day," he told Investor's Business Daily. "There is typically a lot of buying the losers from the year before."
Verizon stock has forged an entry point of 38.88 from a cup-with-handle base. AT&T stock holds an entry point of 20.50 from a cup base.
Fourth quarter earnings for Verizon stock are due Jan. 23. Q4 earnings for T stock are due Jan. 24.
Rising interest rates and Treasury bill yields have been a headwind for dividend paying stocks. But the Federal Reserve has signaled that its policy tightening campaign is over. Wall Street analysts project potential interest-rate cuts in 2024.
Another problem for telecom stocks has been disappointing revenue growth from 5G wireless services.
VZ stock: Marketing Shake-Up
In 2023, VZ stock fell 4%. T stock tumbled 9%.
TMUS stock climbed 14% but still underperformed vs. the S&P 500. It rose 24%.
Management changes continue at Verizon. In December, it hired a new chief marketing officer, Leslie Berland. She held the same position at Peloton Interactive.
An overhang on TMUS stock was removed Dec. 27 when Deutsche Telekom and former T-Mobile parent SoftBank resolved an issue dating back to the Sprint merger in 2020. T-Mobile issued 48.8 million shares, valued at $7.6 billion, to SoftBank at no cost.
Since mid-2022, Deutsche Telekom has owned a majority stake in T-Mobile.
T-Mobile stock has an IBD Relative Strength Rating of 73 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS Rating of at least 80.
Meanwhile, TMUS stock holds a 154.38 entry point. TMUS stock trades at the high end of a 5% buy zone.
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