Telecom NZ Ltd [TEL.NZX] shares have had an amazing run over the last month or so where the share price has taken off from $1.95 in mid April to finish trading at $2.33 yesterday, a rise of almost 20%.
With a share-price last reached in February - a 52 week high for the stock - the stock looks like getting overcooked to me and investors wishing to take a punt on anything that may come out of the fibre network rollout may want to temper their excitement because any additional revenue coming from it is many years away.
For the majority of the last year shares have been trading below 2 bucks and this is on 4 pieces of news out a month ago ( 1, 2, 3, 4 ) mostly related to taxpayer funded broadband.
The market is excited by the prospects for Telecom that subsidised broadband might bring but the payback for investment by the taxpayer and by the company itself is uncertain especially given the low speeds the company indicate their new fibre might bring and the restrictions and frustrations that will bring for customers as they realise they will not be able to do even a fraction of the things their mates overseas have been able to do for a decade or more already and that future speeds for global internet speeds (sans NZ) will be hundreds of times faster than ours.
I have a gut feeling the increased buying has come about from speculation that the company will win the majority of the tenders to rollout taxpayer funded broadband and if this happens Telecom as a company will have to be split into 2 separate companies, each presumably with its own NZX listing. Investors clearly see more value in the company as two seperate entities and see windfall profits if the company splits.
There is of course no guarantee that Telecom will win the majority of the government contracts, but more likely than not it will, and history typically shows that investors do benefit from company splits of this kind.
Market watchers though are ignoring the bungles the company has mismanaged with the introduction of new services and technology in the past so I remain skeptical of share price increases based on the possibility that the fibre roll-out will bear some positive fruit.
Until then performance for the company is likely to be more along the lines of weakening revenue, smaller profits and cost cutting.
Buy closer to 2 bucks on the inevitable pullback.
Share Price Alert Series
Port of Tauranga Ltd
Freightways Ltd 3
Goodman Fielder Ltd 2
Freightways Ltd 2
Telecom New Zealand Ltd 2
Ryman Healthcare Ltd
Charlies Group Ltd
Fletcher Building Ltd 2
Contact Energy Ltd
Steel & Tube Ltd
Telecom New Zealand Ltd
New Zealand Stock Exchange Ltd
Mainfreight Ltd 2
The Warehouse Group Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd 2
Fletcher Building Ltd
Restaurant Brands Ltd
Goodman Fielder Ltd
Pumpkin Patch Ltd
Hallenstein Glasson Holdings Ltd
NZ Refining Ltd
Telecom NZ @ Share Investor
Share Price Alert: Telecom New Zealand Ltd 2
Share Price Alert: Telecom New Zealand Ltd
Telecom New Zealand 2011 first half profit review
Telecom New Zealand 2011 first quarter profit review
Telecom Chart: Lazarus Recovery on lower volume
Telecom maybe oversold
Telecom NZ Share Price has "Jumped the Shark"
I was Wrong... sort of
Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity
Download TEL Company Reports
Discuss TEL at Share Investor Forum - Register free
Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @ Fishpond.co.nz
c Share Investor 2011
Global Stocks Regain Footing - Global stock markets steadied after heavy declines, as Chinese shares bounced back from intraday lows in another roller-coaster session.
7 hours ago