The telecom industry’s growth continued this year with increasing wireless deployments to meet the strong demand for higher-speed networks. With the integration of digital technology into all business areas and rising interest in multi-access edge computing and private cellular networks driving the demand, telecom companies are well-positioned to grow.
According to a report by The Business Research Company, the telecom market is expected to reach $3.63 trillion in 2026, growing at a CAGR of 6%. The adoption of Internet of Things (IoT) technology by manufacturing and transportation services companies should drive the market’s growth.
Furthermore, increasing government and corporate investments in 5G deployment and increased accessibility in rural areas should boost the telecom industry’s growth. The $1 trillion Infrastructure Investment and Jobs Act (IIJA) passed in November last year allocated nearly $65 billion for continued broadband adoption and deployment. In addition, the legislation will help lower prices for internet services.
After years of investments in upgrades, telecom companies are launching 5G global networks. The global 5G infrastructure market is anticipated to grow at a CAGR of 34.2% by 2030.
Investors’ interest in telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 5% gains over the past month. Hence, investing in fundamentally sound telecom stocks Verizon Communications Inc. (VZ), AT&T Inc. (T), and Spok Holdings, Inc (SPOK) could be wise at the current low-price levels.
Verizon Communications Inc. (VZ)
VZ is one of the world’s leading providers of communication, information, and entertainment products and services and serves consumers, businesses, and governmental agencies. The company operates through Consumer and Business segments.
On October 31, 2022, VZ announced its partnership with World Champion Fantasy (WCF), a leading online fantasy Esports platform. The alliance will help Verizon integrate its tools and tech stack into WCF’s platform – PlayerX. This technological invention will change how gamers experience Esports.
On October 27, VZ, Reset Digital, and Yahoo announced their partnership to help VZ improve its audience engagement through Resets Digital’s science and technology-driven approach. Tony Wells, SVP of Marketing at Verizon, said, “As a diverse-owned and operated company, we expect Reset Digital to be an important partner to help us make meaningful progress on our DE&I initiatives.”
VZ’s operating revenues increased 4% year-over-year to $34.24 billion in the fiscal 2022 third quarter ended September 30, 2022. The wireless equipment revenues rose 22.9% year-over-year to $6.58 billion. As of September 30, 2022, the company’s current assets stood at $39.75 billion, compared to $36.73 billion as of December 31, 2021.
The company has increased its dividend for 18 consecutive years. Its dividend payouts have grown at a CAGR of 2.1% over the past five years. The company pays a $2.61 per share dividend annually, which translates to a 6.66% yield on the current price.
Analysts expect VZ’s revenue for the fiscal 2022 fourth quarter (ending December 2022) to increase 3.9% year-over-year to $35.41 billion. The company’s revenue for the current fiscal year is expected to grow 2.4% from the prior year to $136.82 billion. It has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 7.9% over the past month to close the last trading session at $39.20.
VZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Growth and Stability. Within the Telecom - Domestic industry, it is ranked #2 among a total of 19 stocks.
Beyond what we stated above, we also have VZ’s ratings for Value, Sentiment, Momentum, and Quality. Get all VZ ratings here.
AT&T Inc. (T)
AT&T is a global telecommunications, media, and technology service provider aiming to become America’s best broadband provider. It works through the Communications and Latin America segments. Its Communications segment provides wireless voice and data communications services and sells wireless data cards, wireless computing devices, and handsets.
The company’s Latin America segment offers wireless services in Mexico and video services in Latin America.
On October 5, T introduced Fiber Broadband in Rural Vanderburgh County, Indiana, by collaborating with the local government to increase internet access and close the digital divide in their areas. The company is now working with the Cities of Boonville and Martinsville on public-private partnerships to bring AT&T Fiber to both municipalities and install fiber at more than 20,000 sites in the county.
For the fiscal 2022 third quarter ended September 30, 2022, T’s service revenues increased 5.6% year-over-year to $15.30 billion, while its broadband revenues grew 6.1% year-over-year. Its income from continuing operations came in at $6.35 billion, up 26.4% year-over-year.
The company pays a $1.11 per share dividend annually, which translates to a 5.89% yield on the current price. Its four-year average dividend yield is 6.99%.
Analysts expect T’s EPS and revenue for the fiscal 2023 second quarter (ending June 2023) to increase 1% and 1.6% year-over-year to $0.66 and $30.13 billion, respectively. Furthermore, T has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 7% over the past month to close the last trading session at $19.00.
T’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has a B grade for Quality and Value. Within the Telecom - Domestic industry, it is ranked #4 of 19 stocks.
Beyond what we stated above, we also have T’s ratings for Growth, Momentum, Sentiment, and Stability. Get all T ratings here.
Spok Holdings, Inc. (SPOK)
As a healthcare communications establishment, SPOK offers unified clinical communication and collaboration solutions comprising call center operations, clinical alerting and notifications, and mobile communications to care teams.
On October 26, the company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on December 9, 2022, to stockholders of record on November 16, 2022. SPOK’s annual dividend of $1.25 per share yields 15.26% on the current price.
The company’s dividend payments have grown at a 35.7% CAGR over the past three years. Its four-year average dividend yield is 5.92%.
On October 26, Vincent D. Kelly, SPOK’s chief executive officer, said, “We are continuing to invest in a targeted and limited manner in our Care Connect Suite of solutions to enhance our long-standing relationships with the nation’s leading healthcare providers. Our sales team has also produced strong results, booking multiple six-figure deals during the quarter and continuing to grow our pipeline.”
SPOK’s software operation bookings increased 25.6% year-over-year to $6.24 million for the fiscal 2022 third quarter ended September 30, 2022. The company’s operating income came in at $3.54 billion, up 199.5% year-over-year. Its adjusted EBITDA and net income increased 286.6% and 217.08% year-over-year to 4.66 million and $2.90 million, respectively.
In addition, the company’s EPS increased 215.4% year-over-year to $0.15 year-over-year.
Analysts expect SPOK’s EPS for the current fiscal year (ending December 2022) to grow 95.6% from the previous year. The company’s EPS for the fiscal 2023 second quarter (ending June 2023) is expected to increase 40% year-over-year to $0.14.
The stock has gained 8.4% over the past six months to close the last trading session at $8.17.
SPOK’s POWR Ratings reflect its promising prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Quality and Sentiment. Within the Telecom - Domestic industry, it is ranked #1 among 19 stocks.
Click here to see additional ratings of SPOK for Value, Stability, and Momentum.
VZ shares were trading at $38.93 per share on Wednesday afternoon, down $0.27 (-0.69%). Year-to-date, VZ has declined -20.98%, versus a -14.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Telecom Stocks to Buy Before the End of 2023 StockNews.com
