Dycom Dives After Google Halts Fiber Expansion
The shares of Dycom (DY) are falling after Google (GOOG, GOOGL) announced that it would deploy its Google Fiber high speed Internet service more slowly than previously expected. Google is believed to be one of the largest customers of Dycom, which provides contracting and project management services to telecom companies. Additionally, Dycom benefits from the deployment of new infrastructure by other Internet service providers that are looking to keep pace with Google Fiber. In a note to investors, research firm Stifel predicted that Dycom's major customers aside from Google would continue to deploy fiber "aggressively" despite Google's slowdown. The firm kept a buy rating on Dycom.
GOOGLE NEWS: Yesterday, Google Fiber said that it would "pause" its operations in most of the cities with whom it has begun discussions about deploying Fiber but has not yet committed to doing so. The company said that it was embarking on the pause in order to "refine" its approaches to Google Fiber.
ANALYST REACTION: Noting that Dycom has alluded to an unnamed customer which accounted for 6% of its sales in fiscal 2016, Stifel analyst Noelle Dilts believes that Google is the unnamed customer. Dycom's "other major customers" will "continue to deploy fiber aggressively," despite Google's move, wrote the analyst. Moreover, Dycom could benefit from Google Fiber's rollout in four cities to which Google has already committed to bringing the service, Dilts believes. She trimmed her price target on Dycom to $103 from $106 while trimming her earnings estimates for the next two fiscal years, but kept a Buy rating on the stock.
PRICE ACTION: Near noon, Dycom sank a bit over 13% to $73.50 per share.
Disclosure: None.