Why Telefonica Stock Gained 11.1% Last Month

Despite last month’s double-digit rally, the telecom stock is trading down roughly 10% year to date.

| More on:
Arrow descending on a graph

Image source: Getty Images.

What happened

Shares of Telefonica (NYSE: TEF) climbed 11.1% in September, according to data from S&P Global Market Intelligence. The stock gained ground amid broader momentum for the broader market, and it may have also benefited from news surrounding some of its business initiatives.

The Spanish telecommunications company published a press release on Sept. 10 announcing that it had plans to accelerate monetization of its mobile-telecommunications infrastructure. It followed this news with an announcement on Sept. 20 that it had partnered with Atresmedia to form a production company that would create Spanish-language entertainment.

So what

Telefonica hopes to better monetize some of its wireless telecom assets and is potentially looking at diverting some resources and business to its Telxius tower infrastructure unit. The company has been slimming down and trying to become a more focused and efficient operation.

The stock may have seen some positive momentum tied to speculation that the company is interested in selling its Ecuador-based business unit at a price of 800 million euro. Telefonica is increasingly focusing on its core European market, but the Atresmedia deal also shows that it’s exploring growth strategies in areas including media-content development and distribution.

Now what

Telefonica has been selling off businesses in certain markets in order to get its debt back down to more manageable levels. The company sold its operations in Panama, Nicaragua, and Costa Rica to Millicom and its Guatemala and El Salvador operations to Mexican telecom America Movil. The company ended its June quarter with 40.2 million euros of debt, down from roughly 48 million euros in the prior-year quarter. There’s a good chance that the company will unload additional assets in order to strengthen its balance sheet.

Telefonica is scheduled to report third-quarter earnings on Nov. 5. Shares currently trade at roughly 12 times this year’s expected earnings and pack a 6% dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Tech Stocks

A data center engineer works on a laptop at a server farm.
Tech Stocks

Psst … 2 Tech Stocks I’d Buy Before Shopify

Shopify (TSX:SHOP) stock is great -- don't get me wrong. But these two tech stocks are great too, with more…

Read more »

Technology, internet and networking, security concept
Tech Stocks

1 Top Canadian Cybersecurity Firm on the Frontline Against Cyber Threats

Here’s the best Canadian cybersecurity stock you can buy now to benefit from the expected significant surge in demand for…

Read more »

Credit card, online shopping, retail
Tech Stocks

Should You Buy Lightspeed Stock After Its Q4 Earnings?

Despite its volatility, I expect Lightspeed to outperform in the long run due to its healthy growth prospects and cheaper…

Read more »

Shopping and e-commerce
Tech Stocks

Shopify Stock: Is $100 the Next Stop?

Shopify (TSX:SHOP) stock may be headed to the $100 level over the longer term if things fall into the right…

Read more »

Young woman sat at laptop by a window
Tech Stocks

Open Text’s Cloud Kingdom: A SaaS Stock for the Long Haul?

Here's why Open Text (TSX:OTEX) could indeed be a software-as-a-service stock that long-term investors may want to consider right now.

Read more »

clock time
Tech Stocks

Is Now the Right Time to Buy Shopify Stock?

Amid another dip, Shopify stock might be worth buying right now for investors who missed the post-earnings surge.

Read more »

Tech Stocks

Is BlackBerry Stock a Buy for June 2023?

Given its multiple growth drivers, I expect the uptrend in BlackBerry’s stock price to continue.

Read more »

Index funds
Tech Stocks

1 Canadian Tech Stock I’d Buy Before Shopify Stock

Shopify stock is still a good option, but this other tech stock could be even better, especially as it's up…

Read more »