Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Turkcell Iletisim Hizmetleri Stock Popped 11% Today

By Rich Smith - Sep 13, 2018 at 6:26PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A more valuable Turkish lira is good news for Turkish debtors.

What happened

Turkish telco Turkcell Iletisim Hizmetleri ( TKC 0.54% ) closed up 11.6% on Thursday after the country's central bank announced a big boost to interest rates -- 24%, or 6.25 percentage points more than previously -- boosting the Turkish lira's value against the U.S. dollar for the third straight day.

Turkish man in suit on phone

Turkey's central bank "called" an end to the sell-off in Turkcell stock today. Image source: Getty Images.

So what

They say the definition of insanity is "doing the same thing over and over, hoping for a different result." If that's the case, then insanity seems to be working out pretty well for Turkey. When Argentina's central bank tried a similar gambit last month -- hiking interest rates 15 percentage points to 60% -- the Argentine peso actually declined, rather than rose.

But what does any of this have to do with Turkcell stock? Why would a higher interest rate, or a more valuable Turkish lira, be good news for Turkcell?

Simply for this reason: Turkcell carries $2.5 billion in long-term debt on its balance sheet. Relative to cash reserves of just $1.5 billion, that means the company has net debt of $1 billion, most of which is foreign currency debt. The weaker Turkey's currency, the more lira Turkcell must spend to pay interest on (and pay back) its debts. The stronger the currency, though -- and the Turkish lira did get a bit stronger today -- the cheaper everything is for Turkcell.

Now what

Admittedly, there's still a question of whether a mere 4% strengthening in the Turkish lira (that's about how much the currency gained today) justifies a near-12% increase in the value of Turkcell stock. Personally, I think that might be a bit of an overreaction.

That being said, with Turkcell stock valued at only 6.4 times earnings today, the stock was probably oversold and due for a relief rally on any good news. Today's news fit the bill, and that's why Turkcell stock popped.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Turkcell Iletisim Hizmetleri A.S. Stock Quote
Turkcell Iletisim Hizmetleri A.S.
TKC
$3.76 (0.54%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.