Dycom Industries, Inc. (DY): A Bear Case Theory

We came across a bearish thesis on Dycom Industries, Inc. on Valueinvestorsclub.com by Coffee capital. In this article, we will summarize the bulls’ thesis on DY. Dycom Industries, Inc.'s share was trading at $340.02 as of December 17th. DY’s trailing and forward P/E were 34.21 and 29.94  respectively according to Yahoo Finance.

Dycom Industries is a highly cyclical construction company heavily reliant on telecom wireline capex, currently trading at peak multiples that imply durable growth, despite operating at the tail end of a decade-long FTTH buildout cycle. Revenue growth over the past five years has been driven by secular FTTH expansion and minor M&A, but market penetration has already reached 42% of total possible homes, and is expected to surpass 50% by early 2026. Once the FTTH capex cycle peaks around 2026–2027, wireline spend will decelerate, and maintenance revenues will decline as fiber’s lower upkeep costs reduce the TAM for Dycom’s legacy copper, coaxial, and DSL work.

The company’s heavy reliance on a few major telecom clients compounds risk, with the AT&T–Lumen and Verizon–Frontier mergers concentrating over 66% of revenue among only five customers, introducing potential margin pressure and earnings volatility. Dycom’s reported $8 billion backlog is largely backward-looking and misleading, overstating revenue visibility, while its purported recurring service and maintenance revenue is closely tied to new FTTH deployments and will erode as legacy wireline assets are decommissioned.

Competitive threats from FWA and LEO satellite internet further pressure ARPUs and limit cost-per-passing upside, while federal BEAD funding is unlikely to meaningfully benefit Dycom, and any realized benefits would accelerate market saturation. Even with potential opportunities from AI datacenter fiber builds, Dycom is poorly positioned relative to competitors with power and long-haul expertise.

Collectively, these factors suggest significant downside, with Dycom’s fundamentals likely to deteriorate through declining FTTH growth, customer concentration, and margin compression. At current valuations, the stock trades as a durable infrastructure provider, but a normalized multiple of 12x EV/EBIT implies a ~57% downside, reflecting the end of the FTTH cycle and secular pressures, making Dycom a structurally overvalued company with high risk to equity investors.

Previously we covered a bullish thesis on Quanta Services, Inc. (PWR) by Bulls On Parade in May 2025, which highlighted the company’s leadership in electric grid modernization, renewable integration, AI data center infrastructure, and disciplined capital allocation. The company's stock price has appreciated by 41.68% since our coverage. Coffee Capital shares a contrarian view, emphasizing Dycom Industries’ cyclical exposure, FTTH saturation, and high customer concentration.

Dycom Industries, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held DY at the end of the third quarter which was 45 in the previous quarter. While we acknowledge the potential of DY as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.