The telecom industry is working fast to build a foundation for the 5G future. With the fast adoption of the Internet of Things (IoT) and cloud computing driving the demand for high-speed data services, telecom companies are capitalizing on the market's growing needs.
Moreover, President Biden’s Bipartisan Infrastructure Law, which aims to deliver a historic investment in broadband infrastructure deployment of $65 billion to help ensure access to reliable high-speed internet throughout the nation, the telecom industry is expected to benefit substantially.
Moreover, the global telecom market is expected to grow to $2.87 trillion in 2022 at a CAGR of 8.5%.
Hence, the fundamentally strong telecom stock Spok Holdings, Inc. (SPOK) might be an ideal investment in November.
However, deploying 5G networks needs a massive investment that can burden the already debt-laden companies in the industry. And a potential recession amid record-high inflation and Federal rate hikes could be a significant headwind for the industry.
Therefore, avoiding fundamentally weak and risky stock AST SpaceMobile, Inc. (ASTS) could be wise.
Stock to Buy:
Spok Holdings, Inc. (SPOK)
SPOK provides healthcare communication solutions to businesses, professionals, management personnel, medical personnel, field sales personnel and service forces, manufacturing organizations, and government agencies.
The company offers subscriptions to one-way or two-way messaging services; and ancillary services, such as voicemail, equipment loss or maintenance protection services,
On September 26, SPOK declared a regular quarterly dividend of $0.3125 per share, payable on December 9, 2022.
Its annual dividend of $1.25 translates to a 15.06% yield. Over the last three years, SPOK’s dividend payouts have grown at a 35.7% CAGR, and its four-year average dividend yield is 5.93%.
In terms of forward EV/Sales, SPOK is currently trading at 1.06x, 43.4% lower than the industry average of 1.88x. Its trailing-12-month Price/Book of 1.07x is 35.1% lower than the industry average of 1.64x.
During the third quarter ended September 30, 2022, SPOK’s net income increased 217.1% year-over-year to $2.92 million. Its adjusted EBITDA increased 286.6% year-over-year to $4.66 million, while its net EPS increased 215.4% from the year-ago period to $0.15.
Analysts expect SPOK’s EPS to rise 40% year-over-year to $0.14 for the fiscal second quarter ending June 2023. Its revenue is estimated to be $32.50 million for the same quarter.
Over the past three months, the stock has gained 16.6% to close the last trading session at $8.30. It has a 24-month beta of 0.33.
SPOK’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Sentiment and Quality. The stock is ranked #1 among the 19 Telecom – Domestic industry stocks.
Click here for the additional POWR Ratings for Value, Momentum, and Stability for SPOK.
Stock to Avoid:
AST SpaceMobile, Inc. (ASTS)
ASTS operates a space-based cellular broadband network for standard mobile phones. The company’s SpaceMobile service makes mobile broadband services accessible for users traveling in areas without terrestrial mobile services on land, at sea, or in flight.
In terms of its forward Price/Sales, ASTS is currently trading at 26.08x, which is significantly higher than the industry average of 1.22x. Its Price/Book forward multiple of 4.68 is 149.8% higher than the industry average of 1.87.
ASTS’s total operating expenses rose 82.3% year-over-year to $42.12 million for the third quarter ended September 30, 2022. The company’s net income attributable to common stockholders declined 337.3% from its prior-year quarter to negative $9.77 million, while its EPS decreased 357.1% year-over-year to negative $0.18.
ASTS’s EPS for the next fiscal year ending December 2023 is expected to be negative $0.79, declining 51.7% year-over-year. Also, its revenue for the next year is likely to decrease 70.7% year-over-year to $4.05 million.
The stock has declined 44.4% over the past year to close the last trading session at $6.51. It has a 24-month beta of 1.85.
ASTS’ bleak outlook is reflected in its POWR Ratings. The company has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
ASTS has a grade of F for Growth, Value, Stability, and Quality. It is ranked last in the same industry.
In addition to the ratings above, we have also rated ASTS for Momentum and Sentiment. Get all ASTS ratings here.
ASTS shares were trading at $6.52 per share on Tuesday afternoon, up $0.01 (+0.15%). Year-to-date, ASTS has declined -17.88%, versus a -15.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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