CNBC Stock Blog

2 'Great Investment Ideas' in Telecom: Analyst

Since March 9, 2009, markets have moved up more than 60 percent while the telecom sector only saw an 18 percent gain. Can things turn around for the sector? David Dixon, senior telecom analyst at FBR Capital Markets, and Craig Moffett, senior analyst at Sanford C. Bernstein, discussed their sector insights.

Telecom Pushes From Worst to First

“We’ve seen a tremendous amount of uncertainty in the business models across the telecom services spaces,” Dixon told CNBC.

“But investors are going to be quite surprised about the free cash resiliency of this space over the next few years.”

Dixon said there are a few “great investment ideas” coming up through the course of the year.

“As you revisit the space in the fall, you’re going to get certainty on the regulatory environment. And more evidence of revenue resiliency and free cash resiliency are going to ease some of those dividend concerns,” he said.

In particular, Dixon favors Sprint and AT&T .

In the meantime, Moffett said the revenues for wireless data are growing at a smaller fraction of the rate of its usage, so there is a “very real concern” that the return on investment capital for the industry is seeing a step down.

“These dividends are relatively high, but these are negative growth companies without particularly good prospects for seeing a real return to growth,” he said of the large phone companies. “I think it’s too early to say these stocks are truly buys yet.”

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Qwest Communications


Dixon does not own shares of T, S, or VZ.

No immediate information was available for Moffett or his firm.