Rogers investors await Shaw payoff as analysts say rebound will come
Rogers Communications Inc. investors were supposed to reap the benefits when the company's megadeal with Shaw Communications Inc. finally closed a year ago. They're still waiting.
Shares of Canada's largest wireless company have tumbled 16 per cent so far this year — the worst of the country's five major telecom stocks and a full 20 percentage points of underperformance compared with the S&P/TSX composite index. But the stock is so beaten up some analysts believe it's time to dive in.
RBC Capital Markets analyst Drew McReynolds said he sees upside along with an easing of the sector's worst competition risks — such as wireless price wars. It's “an attractive entry point” for Rogers shares, he said after the company reported earnings last week.
Rogers closed Thursday at $52, the lowest level since Oct. 31. Executives told analysts they've hit their goal of $1 billion in “cost synergies” from the Shaw deal, a year ahead of schedule. That moves the merged company into the “next phase,” McReynolds wrote, where the company's wireless unit continuing to do better than rivals and the cable business improving.
National Bank of Canada analyst Adam Shine was perplexed by the 3.3 per cent pullback in the stock price after Wednesday's results. Some investors were wondering why the company didn't raise its guidance, he said.
“The 2024 outlook was just given at the start of February, so no quick update should have been expected,” he wrote, and management had already “telegraphed” it would hit the $1 billion in synergies around the first quarter of this year.
One headwind for the stock is cable revenue, which is limping along as Rogers struggles to add more households beyond what it acquired in the Shaw transaction.
TD Securities analyst Vince Valentini pointed to the bearish sentiment for telecom stocks, but said that “a lot of the bad news has been priced in.”