With how much our lives are lived online these days, you would think that investing in the infrastructure that gets us onto the internet would be a smart play. That must be what Bell Canada (TSE:BCE) thought when it announced plans to buy privately held Ziply Fiber for C$5 billion. But investors don’t appear to have liked the move, sending BCE stock plunging 10% on November 4.
Bell Canada plans to use Ziply to help establish itself as a fiber service provider on the rise in the U.S. as well as its native Canada. Bell is covering the acquisition cost, or at least C$4.2 billion of it, from its sale of Maple Leaf Sports & Entertainment, which it offloaded to rival Rogers Communications (TSE:RCI.B).
Once the deal goes through, Bell Canada will be able to ratchet up its productions and put out a whole lot of fiber. In fact, Bell figures it will have its fiber operations up and running in over 12 million locations in North America by 2028.
Investors Unhappy
The move did not go over well with investors. Bell stock fell to its lowest level in 11 years. This is unusual because the reasoning behind the move is actually fairly sound. Bell said that it was “…trading a minority stake in a sports asset for a business that’s in their area of expertise and can open up new growth prospects.”
It is certainly a more recession-resistant market as sports tend to be a more discretionary purchase. Internet access is almost as vital as power and phone service today.
Is BCE a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on TSE:BCE stock based on one Buy and six Holds assigned in the past three months, as indicated by the graphic below. After a 18.46% loss in its share price over the past year, the average TSE:BCE price target of C$50.05 per share implies 23.45% upside potential.
