Telecom Sector Offers Stability for Investors, Says Daiwa Capital
Daiwa Capital Markets recently highlighted the communications sector as a secure option for investors amid increasing market volatility. Analyst Jonathan Keyes remarked, “In times of economic uncertainty, the telecom industry’s consistent operations, loyal customer base, and predictable financial outcomes provide a refuge for anxious investors.” He emphasized that since carriers offer essential services, their business remains stable, generating regular revenue streams. Although market share among the three major U.S. carriers shifts, their competitive positions appear quite stable.
In a report spanning 13 pages, Kees raised his ratings on the leading two mobile carriers by market share, T-Mobile and Verizon Communications. While he assigned Verizon the highest buy rating, he noted that T-Mobile has been performing even better. So far this year, both stocks have outshone the broader market, with Verizon climbing 20% and T-Mobile rising over 6%. In contrast, the S&P 500 has seen modest fluctuations, ranging from a 2.7% gain at its peak to a 0.7% decline at its lowest point.
According to FactSet data as of Wednesday’s close, Verizon boasts a dividend yield of 5.89%, whereas T-Mobile offers 1.91%. Kees set a $58 price target for Verizon, indicating a potential 21% upside over the next year, while his $240 estimate for T-Mobile suggests a 13% increase.
“We believe VZ presents the best risk-reward scenario, making an upgrade warranted,” the analysts asserted. They indicated that recent updates on investor outlook and stock price declines for TMUS reinforce its growth leadership, thus justifying an upgrade. Notably, T-Mobile has dropped over 16% in the last six months.
Keyes pointed out that Verizon’s appealing yield of nearly 6% and the stock’s 20% increase in 2026 contributed to the upgrade. He also emphasized both companies’ strong plans for shareholder returns in 2026 and beyond, which include dividends. Notably, Verizon has consistently increased its dividend each year. The merging of broadband and wireless services is anticipated to be a key growth factor for both stocks. Keyes stated, “Both VZ and TMUS lead in Fixed Wireless Access, and we expect to see healthy net additions among broadband customers.”
Additonally, Keyes commended the companies for their “price rationality” in an increasingly competitive industry. He suggested that Verizon is likely to maintain its prices while T-Mobile seems to be focusing on innovative and value-added product offerings. Analysts remarked that, despite this year’s rally, Verizon and T-Mobile continue to offer attractive valuations.
