The Canadian telecom stocks have been through a historically bad past couple of years. And with more headwinds ahead, mounting tariff tensions, and a fading consumer amid still-high food inflation, the second half probably won’t see all that much in the way of relief gains, at least for the incumbent telecom firms (think the Big Three) that have already crashed. Indeed, the telecom business is getting tougher to thrive in and while I wouldn’t say every telecom firm is going to put their payout on the chopping block at some point over the next 18 months, I do think that we may be entering an era where a number-four player (a major disruptor) can gain at the hands of the heavyweights.
Indeed, when it comes to the telecom top dogs, it can pay dividends to go with the smaller, up-and-comer that has a high growth ceiling. And while the broad industry could face margin pressures as more Canadian consumers demand more for their dollar, I do think that one telecom firm is well-equipped to keep gaining as its much-larger brothers continue to sag.
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Quebecor stock: A momentum hero in wireless
Enter shares of Quebecor (TSX:QBR.B), a lesser-known regional telecom that’s really started picking up traction at the national level. Indeed, the firm behind Vidéotron has a strong, seemingly untouchable presence in Quebec and parts of New Brunswick. As the company looks to use its wireless business, Freedom Mobile, to snag more market share in wireless markets across the country, I do think QBR.B stock has what it takes to keep delivering on capital gains and dividend growth. Indeed, Freedom Mobile has really improved by leaps and bounds over the years.
And as Quebecor commits to invest in new infrastructure to boost its 5G and 5G+ networks, I think Freedom can, in due time, keep closing the gap with regards to network quality. Now, Freedom Mobile is, by no means, a top network performer in terms of bandwidth, latency, or coverage. However, with some incredibly low monthly plans and a fairly aggressive promotion, I do think that many cash-strapped Canadians looking to cut their bills across the board have more reason to consider making the switch.
In the last quarter, Quebecor posted some pretty impressive results, taking wireless market share with its tough-to-match discounts. With the stock now up a whopping 45% in the past year, with around 30% of those gains coming year to date, I think it’s time to buy the name on technical strength. Why? The company is gaining serious momentum with Freedom.
Quebecor stock looks defensive as well
For years, Freedom Mobile has been known as a wireless service provider with a lack of coverage and poor speeds. Nowadays, it’s seen as a carrier that’s catching up (and fast) with a value proposition that’s tough to top, especially in the face of inflation and a potential recession. If a recession does happen, I think QBR.B stock could gain a further tailwind as it continues to “floor it” to grab more cellphone market share by competing on price.
At 12.3 times trailing price-to-earnings (P/E), I find Quebecor stock to be quite undervalued, given the share-taking we’ve witnessed of late and the potential for more of the same in a competitive industry where low costs and decent-enough connections could be key to winning new business. As it stands, Freedom is still a small fish in the national wireless scene. But with that comes more room for growth. Don’t sleep on the $9.5 billion Quebec-based firm as it eyes higher highs.
