Canadian telecom stocks haven’t been the best to invest in over the past couple of years. And while I’m sure there are many brave contrarians who are more than willing to step in at current prices with the hopes of catching a price at or around the bottom, I do think that there’s really no need to risk catching a falling knife at these levels, especially when you consider how quickly industry dynamics are shifting. Indeed, not every corner of the telecom scene has seen pain.
In fact, Quebecor (TSX:QBR.B), a relatively unknown Quebec-based telecom, is continuing to perform well, even as its Big Three peers face ongoing headwinds and competitive pressures. Undoubtedly, Quebecor stands out as a market disruptor, while the incumbents seem to be in a tougher spot, where further growth is more challenging to achieve without incurring a margin hit.
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Quebecor stock is doing well amid telecom industry pressures
As tempting as it is to go with one of the battered large-cap telecom firms with their massive dividend yields, I’d much rather invest in the likes of Quebecor. Indeed, the yield is much smaller than its peers’ at 3.2%. However, what the name lacks in yield, it more than makes up for in earnings and dividend growth. Undoubtedly, some analysts believe that Freedom Mobile, Quebecor’s national carrier, which it acquired a few years ago, is well-equipped to continue clocking in respectable growth numbers.
In fact, some analysts see the discount wireless carrier as ready to pull ahead of its larger brothers. And I’d have to agree, not just because Freedom’s prices are more competitive, but also because the network has improved significantly, especially over the past two years. Under Quebecor’s leadership, I think Freedom Mobile is poised to reach an inflection point of growth, so to speak, one that could be boosted by a potentially looming Canadian recession.
Freedom Mobile makes Quebecor a recession-resilient share-taker
Apart from its incredibly low prices and rapidly improving network, the carrier seems to be making very smart moves to keep existing customers aboard. Indeed, whether we’re talking about complementary hikes in monthly data or greater transparency in pricing, I’m sure Canadians appreciate the value that Freedom has been able to provide lately.
In a previous piece, I noted that Freedom excels at providing customers ample value for their dollar, and other wireless carriers would need to follow suit or risk losing some market share. Of course, Freedom is still playing catch-up in terms of network quality, but with approximately 12% of the national share (and counting), I’d much rather be invested in the share-taker.
With Quebecor stock winning upgrades even at all-time highs, I’m inclined to stay the course with the Montreal-based up-and-comer, especially as its wireless growth numbers look to stay hot going into the winter.
With recession risks ahead, I actually view Quebecor as a more recession-resilient telecom whose growth cannot be stopped, especially when you consider its absurdly affordable promos ($30–40 for data plans offering 60GB or more). With the means to hike the dividend by 5–10%, as per analyst expectations, I’d look no further than QBR.B at new highs with its still-muted valuation (13.1 times trailing price-to-earnings), which still leaves ample room for multiple expansion.
