Both stocks are having trouble getting back to their pre-COVID share prices but that should be more of a plus than a minus, all things considered, says Jason Mann, chief investment officer at EdgeHill Partners, who says there’s not a lot separating the two stocks and both are currently undervalued.
“We actually like them both and we do own them,” says Mann, speaking to BNN Bloomberg on Thursday. “They both have this perpetual cap ex spend in front of them and both of them have a bit of a challenge with growth looking forward.”
“But the telco space, the communication service space, is not as expensive as some of the more defensive stocks in the staples, in the utilities and especially in the pure growth stocks. So, honestly, you would do well by owning either one of these,” Mann said.
Rogers and BCE fell with the rest of the market during late February and March as the realities of COVID-19 sank in, but the stocks started climbing almost as quickly, stalling about halfway back to their earlier valuations.
So far in 2020, BCE is down 2.2 per cent for the year and Rogers is down 10.3 per cent.
“In terms of metrics they really do score quite similarly so we would be happy owning either,” Mann says. “And these are the types of businesses that you can hold through long periods of time and not be too stressed about it.”
BCE and Rogers come with healthy and as-safe-as-they-come dividends, with BCE currently yielding 5.5 per cent and Rogers at 3.5 per cent.
Last year at this time, the two companies were grappling with a shift to no overage fees for mobile customers, aimed at bringing more people on board but causing a blip in revenue due to the loss of lucrative fees.
The change seemed to hit Rogers more severely, which in turn affected its share price over the past half year or more.
Meanwhile, both companies have put billions into upgrading infrastructure in preparation for the launch of 5G networks. Rogers has been first out of the gate, starting up its 5G wireless networks in Toronto, Vancouver, Montreal and Ottawa in January, while BCE has chosen to hold off on its launch due to COVID-19.
BCE on Tuesday announced that it will be using equipment from both Nokia and Ericsson in its 5G rollout as opposed to Chinese tech giant Huawei, whose ties to the Chinese government have been under scrutiny and have caused a number of countries to ban Huawei from taking part in their 5G networks. Canada has so far not made a decision on the topic.
Both companies have now reported earnings for the first quarter of 2020, which featured some of the impact caused by the COVID-19 crisis. Rogers saw its revenue for the Q1 drop five per cent year-over-year to $3.416 billion while BCE’s revenue fell 0.9 per cent to $5.680 billion.