The telecom industry is growing rapidly amid the increasing government and corporate investments in 5G deployment, improved availability of handsets, and increased accessibility. The use of 5G services is starting to take off. According to the Ericsson 2022 Mobility Report, global 5G subscriptions are on track to reach 5 billion by the end of 2028.
In addition, the telecom market is expected to grow to $3.82 trillion in 2027 at a CAGR of 5.8%, driven by IoT technology adoption by manufacturing and transportation services companies.
Moreover, the use of AI in the telecom market is expanding. The global AI in the telecommunications industry is predicted to grow at a CAGR of 41.4% until 2031. Investors' interest in telecom stocks is evident from the SPDR S&P Telecom ETF's (XTL) 5.1% gains over the past nine months.
Given the backdrop, fundamentally sound telecom stocks Verizon Communications Inc. (VZ) and IDT Corporation (IDT) could be ideal additions to your watchlist.
Verizon Communications Inc. (VZ)
VZ and its subsidiaries offer communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. Its segments are Consumer and Business.
On January 12, 2023, VZ announced the launch of Verizon Mobile for Microsoft Teams. This new service integrates mobile devices with Microsoft Teams for easier calling and collaboration as part of its strategic relationship with Microsoft Corporation (MSFT). VZ should strategically benefit from this partnership with the tech giant.
In terms of forward EV/EBITDA, VZ is currently trading at 7.28x, 17.1% lower than the industry average of 8.79x. Its forward Price/Book of 1.65x is 24.6% lower than the industry average of 2.19x.
VZ's trailing-12-month gross profit margin of 56.79% is 14.38% higher than the 49.65% industry average. Its trailing-12-month net income margin of 15.53% is 377.3% higher than the 3.25% industry average.
VZ's operating revenues came in at $35.25 billion for the fourth quarter that ended December 31, 2022, up 3.5% year-over-year. Moreover, its wireless equipment revenues increased 4.1% year-over-year to $7.63 billion. VZ's net income and EPS came in at $6.70 billion and $1.56, reflecting an increase of 41.4% and 40.5% from the prior-year quarter.
VZ's revenue is expected to increase marginally year-over-year to $139.12 billion in 2024. Its EPS is expected to increase marginally year-over-year to $4.74 in 2024. Over the past three months, the stock has gained 3.9% to close the last trading session at $40.01.
It's no surprise that VZ has an overall B rating, equating to Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has a B grade for Stability and Quality. VZ is ranked #4 out of 19 stocks in the Telecom - Domestic industry. Click here for the additional POWR Ratings for Growth, Momentum, Sentiment, and Value for VZ.
IDT Corporation (IDT)
IDT provides communications and payment services in the United States and internationally. The company operates through three segments: Fintech; net2phone; and Traditional Communications.
In terms of trailing-12-month EV/EBITDA, IDT is currently trading at 9.18x, 9.8% lower than the industry average of 10.17x. Its trailing-12-month Price/Sales of 0.61x is 54.5% lower than the industry average of 1.35x.
IDT's trailing-12-month ROCE of 23.99% is 561.9% higher than the 3.62% industry average. Its trailing-12-month ROTA of 8.26% is 366.4% higher than the 1.77% industry average.
IDT's income from operations came in at $20.2 million for the first quarter that ended October 31, 2022, up 46.9% year-over-year. Moreover, its net profit came in at $11 million, compared to a net loss of $2.48 million in the year-ago period. Also, its EPS came in at $0.43, compared to a loss per share of $0.10 in the prior-year period.
The stock has gained 20.4% over the past three months to close the last trading session at $31.33.
IDT's overall B rating equates to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value. It is ranked #3 in the same industry. Get the additional POWR Ratings for Stability, Sentiment, Momentum, and Quality for IDT here.
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VZ shares were trading at $40.04 per share on Monday morning, up $0.03 (+0.07%). Year-to-date, VZ has gained 3.22%, versus a 7.43% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
2 Telecom Stocks to Add to Your Watchlist if You Haven't Already StockNews.com
