Telefonica SA (TEF): Today's Featured Telecommunications 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 Telecommunications industry lower today making it today's featured Telecommunications laggard. The industry as a whole closed the day up 0.8%. By the end of trading, Telefonica fell 19 cents (-1.3%) to $14.74 on light volume. Throughout the day, 2.2 million shares of Telefonica exchanged hands as compared to its average daily volume of 3.7 million shares. The stock ranged in price between $14.68-$14.89 after having opened the day at $14.79 as compared to the previous trading day's close of $14.93. Other companies within the Telecommunications industry that declined today were: WPCS International ( WPCS), down 10.5%, Clearwire ( CLWR), down 10.4%, Powerwave Technologies ( PWAV), down 9.3%, and RIT Technologies ( RITT), down 7.5%.
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Telefonica, S.A. provides fixed and mobile telephony services primarily in Spain, Latin America, and rest of Europe. Telefonica has a market cap of $68.55 billion and is part of the technology sector. The company has a P/E ratio of 57.4, above the average telecommunications industry P/E ratio of 12.4 and above the S&P 500 P/E ratio of 17.7. Shares are down 13.1% year to date as of the close of trading on Monday. 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, Ditech Networks Corporation ( DITC), up 74.5%, Telestone Technologies Corporation ( TSTC), up 45%, Zhone Technologies ( ZHNE), up 15.3%, and AudioCodes ( AUDC), up 10.4%, were all gainers within the telecommunications industry with Research in Motion ( RIMM) being today's featured telecommunications industry leader.

For investors not wanting singular stock exposure, ETFs may be of interest. Investors who are bullish on the telecommunications industry could consider iShares Dow Jones US Telecom ( IYZ) while those bearish on the telecommunications industry could consider ProShares Ult Sht Telecommunication ( TLL).

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