SpaceX Rocks Telecom. Here’s My Play on Tower Stocks and the Big 3
Elon Musk’s latest move could signal the future telecom. Here’s how I’m trading the initial reaction.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The future of telecom?
The news broke on Thursday evening. I saw it at Bloomberg, but it was reported across a number of outlets.
Elon Musk’s SpaceX (SPCX) plans to secure a minimum of 80,000 cell sites across the U.S. According to the report, the company is said to be in talks with at least one major cellular infrastructure company to reach that goal. The high-profile CEO of both SpaceX and Tesla (TSLA) has made no secret of his intentions for SpaceX to create a standalone wireless carrier, not just via satellite but through terrestrial means as well.
SpaceX already has more than 11,000 satellites currently in low-Earth orbit, providing Starlink broadband service to more than 13.5 million customers in 174 countries. Readers will recall that earlier this month, SpaceX announced the purchase of low-band spectrum from Grain Management. That spectrum band penetrates obstacles such as buildings and brought Elon’s company one step closer to offering mobile service in direct competition to the big three.
This would threaten the existing providers in that space, an industry that was clearly (in my opinion) ripe for disruption, with new competition from a both well-funded and politically significant new player.
Share prices for Verizon (VZ), AT&T (T) and T-Mobile (TMUS) were all down sharply overnight. Conversely, shares of Crown Castle (CCI) and American Tower (AMT) are trading sharply higher. Crown Castle and American Tower are two of the three largest operators of U.S. wireless communications infrastructure and cell towers. The largest player in that business, Vertical Bridge Holdings, does not trade publicly.
Trade Idea
Yes, I do think that SpaceX will indeed enter the telecom arena with all of the fury and energy that Elon Musk is known for. That said, CCI and AMT are both up more than 10% Friday morning while the telecoms are all down 5% to 6%.
Once this article is public, if these prices hold, I am likely to short some AMT and buy some AT&T for a trade. A trade! I am not thinking of becoming invested and I am not betting the farm. I am only interested in making back a few bucks after my tech names have been roasted this week.
AMT has developed a Double Bottom pattern of bullish reversal with a $181 pivot (see chart above). The stock recently used its 200-day simple moving average (SMA) as support implying that professional managers were not about to let the stock come in. I see the stock trading as high as $215 to $220 based on this technical setup. Eventually. First there will be an attempt to fill this new gap though.
I do not love AT&T. Not by a long shot. That said, I see the possibility for support to show up at the 78.6% Fibonacci retracement level of the early July into September rally (see chart above). In addition, there is also that unfilled gap from early October staring us in the face that would require a tick at $24.50 or higher to fill. Should that all fail, this stock still boasts a dividend yield that approached 5%.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
