Should You Buy Rogers on the Dip?

Rogers Communications Inc (TSX:RCI.B)(NYSE:RCI) has fallen 8% over the past five days as the company had an uncharacteristically big drop earlier this week after it announced its quarterly earnings.

However, it wasn’t how the company did during the past quarter that got the attention of investors, but its guidance. Rogers said that it would be reducing its forecast for 2019 for not only revenue, but free cash flow, adjusted EBITDA, and capital expenditure as well.

Of key importance to investors were the downward adjustments to revenue and adjusted EBITDA. Rogers blames this on the company’s new unlimited data plans.

In its press release, the company stated that "The downward adjustment primarily reflects faster-than-expected adoption of our new Rogers Infinite™ unlimited data plans and the related reduction in overage revenue, lower Wireless equipment revenue resulting from the highly competitive environment, and certain efficiencies recognized this year on capital expenditures."

While it may be bad news for investors, it’s clear that over the long term this is where the industry is headed, and companies that don’t go the unlimited route may end up losing customers who switch to companies that offer the plans.

It’s a bit of a lose-lose situation, but over the long term, Rogers will be much stronger and more competitive.

The drop in price has resulted in the stock now reaching a new 52-week low. For investors, this could be a great opportunity to grab one of the top stocks on the TSX at a reduced price.

At 15 times earnings, it’s not a bad price for the telecom giant. The decline in price also makes its dividend a bit more appealing as well, with Rogers now yielding around 3.3% per year.