Verizon expansion : FYBR done, LUMN next ?
On Wed, 4 Sep 2024 - $Frontier Communications Parent Inc.(FYBR)$ gained +1.51%, after The Wall Street Journal (WSJ) reported that $Verizon(VZ)$ was in advanced talks to acquire the Dallas-based fibre provider. (see below)
Frontier Comms has gained +24.14% for week ending 6 Sep 2024. (see below)
It ended last, last Fri, 30 Aug 2024 at $28.62 per share.
With the acquisition news in the media, it ended 1st week of September at $35.53.
All this despite US 3 Composite index trended down, due to “too cool” US economy - DJIA (-2.47%), S&P 500 (-3.64%) & Nasdaq (-5.44%).
Barron’s think.
Investors who missed out on the initial wave of gains, may now want to look at which company is potentially the next beneficiary ?
Verizon likely will be hard-pressed to do another deal after the $20 billion all-cash acquisition of Frontier, though it’s still possible if it’s the right deal.
Another top US cellular network company, $T-Mobile US(TMUS)$ is looking “financially” constrained. After all, it has made 2 purchases within a short time span. (see below)
On 28 May 2024, it announced plans to buy most of US Cellular’s wireless operations & some of its spectrum assets, with a purchase price of $4.4 billion, including cash and debt. (see above)
Earlier in May, 02 May 2024 to be exact, it bought budget wireless provider Mint Mobile, where Hollywood actor - Ryan Reynold was a major shareholder. (see above)
This leaves, $AT&T Inc(T)$ (last of 3 top US cellular companies) without such encumbrances - for now.
Two ‘Stand Out’ Targets.
As for targets, two companies stand out.
(1) $Lumen Technologies(LUMN)$.
First is Lumen Technologies, formerly CenturyLink.
This nearly $6 billion company has expanded through acquisitions.
This included the $25 billion Level 3 Communications merger in 2017, that increased its debt profile and enterprise customer base.
Realistically, Lumen Technologies as a whole, is not the best fit for Verizon.
Verizon’s Enterprise and overall segment catering to businesses has been on a general sales decline trend, so Level 3 doesn’t make much sense.
However, Lumen’s Incumbent Local Exchange Carrier (ILEC) business, that includes millions in fiber subscribers in 16 US states, primarily on the West Coast, looks interesting.
New Street Research, US Comms Services research team’s Lead, Jonathan Chaplin in his notes:
Shared a hypothetical a scenario where Verizon acquires Lumen.
Spins out its own enterprise business along with Level 3 Communications.
Verizon has about 18 million fiber locations, growing by 500,000 annually.
Adding Lumen and Frontier could take fiber locations to 43 to 47 million by the end of the decade.
The hypothesis seems to wield sufficient synergy and is a “workable” solution.
Question, will Verizon take the bite?
Investors could also look at Uniti.
In May 2024, the company announced:
Its decision to buy part of Windstream to improve its position, as a broadband supplier for the nation’s largest companies.
And expand within Tier II and III markets.
Raymond James Financials, Stock analyst - Frank Louthan on Friday said Uniti is on track to resemble a smaller version of Frontier by the first half of 2025.
Frontier - Still A Buy ?
Last Summer, Barron’s had recommended buying Frontier’s stock at around $14 per share.
At the time, Barron’s liked the company’s growth potential and the acquisition by Verizon was not insight.
Back in the present, investors looking into either LUMN or UNIT, need to weigh the fundamentals against the potential of a merger.
This is because it is difficult to time the market.
Currently, it is impossible for an investor to profit $40,000 or more from a $100,000 investment in Frontier Communications.
A possibility would have been to:
Buy the stock, when it was somewhere below $30 in recent days.
Sell before Wed, 04 Sep 2024 closing.
Frontier: Technical Analysis.
(1) Buy or Sell indicators.
Overall consensus is a “Strong Buy”.
Technical analysis consensus is a “Buy”.
Moving averages consensus is a “Strong Buy”, given its YTD performance is up +37.61%.
(2) Support & Resistant Levels.
Based on Fri, 06 Sep 2024’s closing price of $35.53, below are its resistance and support level.
Pivot point 1st Resistance level (high) - $35.88.
Pivot point 2nd Resistance level (high) - $36.22.
Pivot point 1st Support Point (Low) - $35.10.
Pivot point 2nd Support Point (Low) - $34.66.
With the hype surrounding FYBR still raw & fresh, it pays to be patient and wait for calm to return, not unless “speculation” is on one’s mind, then “strike while the iron is hot”!
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Nice recovery of VZ anyways. Big Red in the green with a new 52 week high finally
Yet market continuous to dip 1.5 hours into trading.
Shouldn't we be celebrating about a cooling US inflation?
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