Telefonica SA (TEF): Today's Featured Technology Laggard

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

Telefonica ( TEF) pushed the Technology sector lower today making it today's featured Technology laggard. The sector as a whole closed the day down 0.1%. By the end of trading, Telefonica fell 25 cents (-1.8%) to $13.97 on light volume. Throughout the day, 2.3 million shares of Telefonica exchanged hands as compared to its average daily volume of 3.7 million shares. The stock ranged in price between $13.96-$14.15 after having opened the day at $14.05 as compared to the previous trading day's close of $14.22. Other companies within the Technology sector that declined today were: Winland Electronics ( WEX), down 16.7%, Local Corporation ( LOCM), down 15.1%, Dynasil Corporation of America ( DYSL), down 13.1%, and Intelligent Systems ( INS), down 13%.

Telefonica, S.A. provides fixed and mobile telephony services primarily in Spain, Latin America, and rest of Europe. Telefonica has a market cap of $62.66 billion and is part of the telecommunications industry. The company has a P/E ratio of 57.4, above the average telecommunications industry P/E ratio of 11.3 and above the S&P 500 P/E ratio of 17.7. Shares are down 20.1% year to date as of the close of trading on Friday. Currently there are no analysts that rate Telefonica a buy, one analyst rates it a sell, and three rate it a hold.

TheStreet Ratings rates Telefonica as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins.

On the positive front, A123 Systems ( AONE), up 19.5%, Rediff.com India ( REDF), up 19.1%, B Communications ( BCOM), up 18.1%, and AudioCodes ( AUDC), up 14.1%, were all gainers within the technology sector with Cavium ( CAVM) being today's featured technology sector leader.

For investors not wanting singular stock exposure, ETFs may be of interest. Investors who are bullish on the technology sector could consider Technology Select Sector SPDR ( XLK) while those bearish on the technology sector could consider ProShares Ultra Short Technology ( REW).

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