What a weak week it was for insider buying. We could not find a single transaction from a director or C-Suite executive that lit up any of our criteria targets. So, we turned our focus to the largest institutional buy for the week with Frontier Communications Parent, Inc. (FYBR).
FYBR provides high-speed internet services to residential and business customers in rural and suburban areas across much of the United States. Frontier Communications is led by Nick Jeffery, who was appointed as CEO in March 2021. Jeffery has extensive experience in the telecommunications industry, having previously served as CEO of Vodafone UK and CEO of Vodafone Group’s Africa, Middle East, and Asia-Pacific region.
Ares Management Corporation (ARES) bought 1 million shares of Frontier Communications on March 14, 2023 at $21.44 pers share; a total investment of more than $21.4 million. In a little more than a month, the asset management company acquired 10,447,610 shares adding up to $273,523,389. The minimum price paid was $21.09 and max of $23.80. FYBR trades at $20.92 as of the close on April 21, 2023.
The growth of high-speed internet services to residential and business customers in rural and suburban areas has been significant in recent years, as more and more people rely on the internet for work, education, and entertainment. Here are some statistics that illustrate this trend:
According to the Federal Communications Commission (FCC), as of 2021, approximately 84% of the U.S. population has access to fixed terrestrial broadband services with download speeds of at least 250 Mbps and upload speeds of at least 25 Mbps. However, access to high-speed internet services varies significantly by geographic location, with rural areas and tribal lands often having less access to broadband services than urban areas.
The pandemic has highlighted the importance of reliable high-speed internet access, as many people have had to work and attend school from home. According to a survey by Pew Research Center, as of September 2020, 53% of U.S. adults said that the internet was essential for them during the pandemic.
The demand for high-speed internet services is expected to continue to grow in the coming years. According to a report by ResearchAndMarkets.com, the global market for fixed broadband services is projected to grow from $109.2 billion in 2020 to $157.2 billion by 2025, at a compound annual growth rate (CAGR) of 7.6%.
Companies like Frontier Communications are likely to benefit from this trend. According to a report by the U.S. Department of Agriculture, as of December 2020, there were approximately 14.5 million rural Americans without access to broadband services with speeds of at least 25 Mbps download and 3 Mbps upload. Closing this digital divide is a priority for the government and many companies in the telecommunications industry.
Wall Street sees the market opportunity potentially turning into a higher stock price for FYBR with a one-year price target of $36.70. (2) It could be a choppy 18-23 months for the company as they transition from legacy businesses to a more concentrated effort in high growth, high speed internet services.
Earnings per share (EPS) are forecasted to hit $0.57 in 2023, down from $1.80 last year, and fall further to $0.38 next year. Sales, however, are projected to inch forward to $5.84 billion in 2024 from $5.76 billion this year. (3)
In our experience, stocks can be volatile and struggle during times of falling earnings. However, they tend to rebound quickly once earnings start moving in the right direction. There could be some value in FYBR shares as the average company in the industry trades at 3.7 times sales (P/S). Whereas Frontier Communications is currently valued at just 95 cents for every dollar of revenue. (4)
Overall: Frontier Communications Parent, Inc. (FYBR) could offer some value based on its discounted P/S valuation relative to the industry norm. However, the path to equilibrium is likely to be filled with ups and downs until management reverses the trend of declining earnings per share.
FYBR is only appropriate for high-risk investors with a time horizon of at least two years.
1 – https://www.secform4.com/insider-trading/20520.htm
2 – https://finance.yahoo.com/quote/FYBR?p=FYBR
3 – https://finance.yahoo.com/quote/FYBR/analysis?p=FYBR
4 – https://finance.yahoo.com/quote/FYBR/key-statistics?p=FYBR