The communications services sector has been on an unbelievable tear for nearly two years. Since hitting a low on October 2022, the Communication Services Select Sector (XLC) has nearly doubled, outperforming the S & P 500 in that time. This year alone, its up more than 22%. It also hit a record high on Wednesday. “The smallest sector in the market (by constituents not value) has been one of the most dominant over the past two years,” wrote Wolfe Research’s Rob Ginsberg. “Quite impressive, especially as one of its biggest constituents in GOOGL is still 15% off its highs and looks like it’s headed lower.” Communications services is made up of just around 19 companies. Four of them, however, are worth more than $200 billion based on market cap: Alphabet : $1.996 trillion Meta Platforms : $1.437 trillion Netflix : $309 billion T-Mobile : $237 billion The good times for the sector may be coming to an end, though. Ginsberg pointed out that the XLC recently broke above its 2021 peak “in the face of notable bearish divergences in [relative strength index] and [moving average convergence/divergence],” two closely watched technical indicators. This is “very similar to what we saw after the peak in ’21. Is it time we fade the group or does this trend persist? Our sense is that is better for sale here,” Ginsberg wrote. Elsewhere on Wall Street this morning, Bernstein upgraded Starbucks to outperform from market perform. “We believe that Brian Niccol is the perfect CEO to guide the resurgence of today’s Starbucks, leveraging the experience he accumulated at Taco Bell and Chipotle , that were in a similar turnaround mode when he became CEO,” analyst Danilo Gargiulo wrote. “The appointment as CEO and Chairman of the Board should free up management to draft a plan aimed at operational stability vs chasing growth at all costs,” he added.
Newyork Central Post
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