Dycom Industries (DY) , a large domestic telecommunications contractor, is under a little pressure following news that there may be slowing in the Google (GOOGL) fiber rollout in the Silicon Valley area in exchange for more aerial fiber spend. The stock was trading down 8.7% late in the day.
We have reported here that Dycom is a meaningful beneficiary in the current, and accelerating, fiber spending environment. Google is a large customer of Dycom's, but not the largest. Most recently, AT&T (T) , Comcast (CMCSA) and CenturyLink (CTL) are larger -- and they each emphasized fiber spending plans recently, mostly to compete with the increasingly threatening GOOGL to provide ultra-high speed Internet in areas around San Francisco and eventually everywhere. (AT&T is part of TheStreet's Dividend Stock Advisor portfolio. Comcast is part of the Action Alerts PLUS portfolio.)
DY has been on a tear of late, as a result of this increased spending for fiber deployment. And shares have reached "momentum" territory -- you know, where DY is increasingly linked to Google's nationwide deployment -- and to this crowd, nothing else will matter. So any variances, even little news blurbs reporting deployment delays, will disproportionately affect DY shares.
I'm of two minds. I love Dycom. It executes well and has the best customer roster in the industry. The company has solid operating leverage to strong telecom spending trends. It's the name to own for the bulls who think our nation will be wired, or wirelessed, to the hilt. We can all use broader and faster data coverage and Google, Dycom, the telco and cable companies all understand this.
It wasn't long ago, though, that these trends were apparent, but the stock was half of what it is today. That's my rub. I know spending like this is highly cyclical and can change on a dime, more or less.
When I look at DY shares' sensitivity to the most minimal of news items, it makes me nervous. It shows that some of the 31 million or so shares are in very speculative hands. Proceed slowly, in any event.
I'll leave this up to you. I'm just pointing out the action. DY is a solid company, and one of the names to play if the belief is that this round of fiber spend has some serious legs.
If you're in that camp, tomorrow morning will probably present an entry point to put a toe in the water -- at least for a trade.