Our Outlook for Media & Telecom Stocks
Media and telecom offer some pockets of stability, but few signs of an economic rebound.
Although portions of the media and telecom sector continue to offer stability, it has shown few concrete signs of economic recovery. Cable companies saw a rebound in growth during the first quarter, but both Comcast (CMCSA) and Time Warner Cable (TWC), which collectively reach nearly two thirds of U.S. households, reported that March and the first weeks of the second quarter looked more like the end of 2008, when consumers were effectively "frozen." Networking and telecom equipment companies indicated that customers have been more willing to discuss the possibility of buying new equipment, and they have even budgeted for projects. Reported sales and management forecasts still point to double-digit percentage declines year over year in sales, showing that customers have yet to commit to new spending. Even more clear-cut growth areas, such as online advertising and wireless data services, have taken a hit. We believe these results reflect the theme we've seen for several quarters now: The downturn has accelerated or exacerbated certain trends across media and telecom that will allow firms positioned well to emerge stronger while forcing many of those less fortunate by the wayside.
Michael Hodel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.