7. Turkcell (NYSE:TKC)
Upside Potential: 35.33%
Market Cap: $6.18 Billion
Turkcell (NYSE:TKC) is a Turkish telecommunications and technology services provider. As of 2023, Turkcell (NYSE:TKC) operates in four countries and offers mobile, fixed, and broadband services. The company has been investing heavily in 5G and other advanced technologies, positioning itself as a key player in the Turkish and regional markets.
Turkcell (NYSE:TKC) serves over 38.2 million mobile subscribers and more than 3 million fiber broadband subscribers. The company’s extensive infrastructure and broad customer base provide it with a significant competitive advantage, enabling it to capitalize on the growing demand for high-quality telecommunications services in Turkey. As the country continues to develop its digital economy, Turkcell (NYSE:TKC) is well-positioned to capture a larger share of this expanding market.
On February 29, Turkcell (NYSE:TKC) entered into several Memorandums of Understanding (MOUs) with Huawei, to advance their collaboration in three key areas. The two companies will jointly work on developing 5.5G technologies, such as Ambient IoT (Passive IoT) and RedCap (Reduced Capability), and on the creation of next-generation 5.5G networks. Their efforts will also focus on green technologies, aiming to reduce carbon footprints through energy-efficient solutions in GPON networks, the use of solar and green energy, and improvements in energy efficiency for WDM networks. Additionally, both companies will pursue innovations in artificial intelligence to develop user-centric, self-optimizing networks.
One of the core strengths of Turkcell (NYSE:TKC) lies in its ability to raise prices faster than the inflation rate, a key factor driving the company’s margin expansion. In Q1 2024, Turkcell’s mobile average revenue per user surged by 95.3% year-over-year, while fiber average revenue per user increased by 89.7%, both well ahead of Turkey’s CPI inflation rate of 66.8%. This pricing power has allowed Turkcell (NYSE:TKC) to significantly improve its EBITDA margins, which reached 41.4%, one of the highest levels in recent years. In Q1 2024, the company reported an 11.8% year-over-year increase in revenues and a 23.2% surge in EBITDA. Turkcell (NYSE:TKC) raised its full-year guidance to a low double-digit revenue growth rate, indicating confidence in its ability to continue outperforming in the coming quarters.
Turkcell (NYSE:TKC) presents a compelling investment opportunity, driven by its market leadership, pricing power, and effective management in a challenging macroeconomic environment. As the company continues to execute its margin expansion strategy, it is poised to deliver sustained earnings growth, making it an attractive buy for investors. With its ability to outperform inflation and navigate currency risks. While the Turkish Lira’s depreciation poses a risk, Turkcell (NYSE:TKC) has shown resilience through effective hedging strategies. The company has significant US dollar-denominated debt, with over $1 billion maturing in 2025. However, Turkcell’s (NYSE:TKC) proactive management of foreign exchange (FX) exposure has mitigated the impact of currency fluctuations on its balance sheet. The company remains well-positioned to navigate these challenges, and its robust cash flow generation will support debt servicing efforts.
In the second quarter, Turkcell’s (NYSE:TKC) stock was held by 5 hedge funds with stakes worth $3.15 million. Schonfeld Strategic Advisors is the largest shareholder in the company with a stake worth $2.36 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $9.50, which represents a 35.33% upside potential from its current level.
