Despite market optimism surrounding the Fed’s potential rate cut, some, like these telecom stocks to sell, have sunk to dangerous levels. One of the industries that got our attention is telecommunications. The S&P Telecom Select Industry Index has grossly underperformed YTD, returning -13.84% to investors. This index includes the three major telecom companies, Verizon (NYSE:VZ), AT&T (NYSE:T) and T-Mobile US (NASDAQ:TMUS).
In addition, guidance expectations have been slashed and this situation is predicted to persist unless management makes sweeping changes that will affect their financials. The underwhelming growth in the last few years has significantly contributed to revenue constraints in these companies. Investors should consider these telecom stocks to sell as they are grappling with dismal outlooks, thanks to the recent overall market rally.
8×8 (NASDAQ:EGHT) is a telecommunications services company specializing in Voice over IP solutions through SaaS (software-as-a-service). The company’s platform provides solutions including 8×8 Work, an end-to-end united communications service. It also provides 8×8 Contact Center, an omnichannel for its clients to engage with customers. Lastly, 8×8 X Series, which serves as a communications hub for its users’ clients and employees.
The company’s reported revenue this quarter was lower than last year by $2.4 million. While EGHT did noticeably improve GAAP operating losses YoY, it still operates at a loss. If its outlook is any indication, management is not entirely confident of its growth and still has conservative revenue estimates. Despite analysts’ “Buy” rating, EGHT should be included in your telecom companies to sell.
Next on our list of telecom stocks to sell is one of the big three telecoms in the United States, AT&T (NYSE:T). The company offers ethernet-based fiber services, IP Voice and other managed telecom services. Apart from wireless and wireline communications, the company also owns DirecTV, a multichannel video programming distributor offering linear television and streaming services. The company is currently exploring the implementation of AI across its customer service to empower its employees further.
One of the main concerns with AT&T is the “risk of overhang” with its old cables covered in toxic lead. In addition, while the company has increased revenues in its broadband and mobility services, a closer look at these segments shows a decline in Business Wireline revenues and increased operating expenses. The company has also experienced a decrease in net income from continuing operations and an operating loss in its America – Mexico segments. In our view, these factors provide a compelling argument for why the company is worth selling now.
Telephone and Data Systems (TDS)
Last from our list of telecom companies to sell is Telephone and Data Systems (NYSE:TDS). TDS offers various solutions under its BendBroadband, TDS Telecom, UScellular and OneNeck IT Solutions. It provides a variety of communication services and devices to suburban and rural communities.
TDS is up 71.3% YTD. However, the company reported a decline in total operating revenues YoY, a net loss attributable to shareholders and negative earnings. Overall, I am not discounting the company’s growth in its US cellular segment and expansion of fiber services. However, I believe it is still best to sell TDS despite analysts’ “Buy” recommendations until the company achieves positive results.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.