Despite macroeconomic challenges, the telecom industry is predicted to grow due to strong demand and rapid digitalization. So, I think telecom stocks T-Mobile US, Inc. (TMUS), Verizon Communications Inc. (VZ), and ATN International, Inc. (ATNI) could be worth adding to your watchlist.
The global artificial intelligence in telecommunications market is expected to be valued $1.18 billion in 2023 and $14.50 billion by 2033, with a significant CAGR of 28.5%. The deployment of 5G technologies, growing smartphone penetration, and the acceptance of AI solutions are driving the rise of AI in the telecommunications sector.
Also, the global telecommunication market is predicted to grow at a CAGR of 6.2% until 2030. This expansion is being driven mostly by rising demand for high-speed internet access and the rapid adoption of 5G. Also, the increasing popularity of smartphones and the expansion of digitalization across numerous industries contribute to its growth.
Investors’ interest in telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 2.9% gains over the past three months.
With these favorable trends in mind, let’s delve into the fundamentals of the three Telecom - Domestic stocks, beginning with number 3.
Stock #3: T-Mobile US, Inc. (TMUS)
TMUS together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. The company offers voice, messaging, and data services to customers in the postpaid, prepaid, and wholesale and other services.
TMUS’ forward non-GAAP PEG of 0.37x is 75% lower than the industry average of 1.48x.
TMUS’ trailing-12-month EBIT margin of 19.07% is 124.2% higher than the 8.50% industry average. Its trailing-12-month net income margin of 7.82% is 89.5% higher than the 4.13% industry average.
TMUS’ total service revenues for the second quarter ended June 30, 2023, increased 2.8% year-over-year to $15.74 billion. Its adjusted EBITDA came in at $7.41 billion, up 5.7% year-over-year.
Also, its net income came in at $2.22 billion, compared to a net loss of $108 million for the same period. Its EPS came in at $1.86, compared to a loss per share of $0.09.
The consensus revenue estimate of 81.77 billion for the year ending December 2024 represents a 3.9% increase year-over-year. Its EPS is expected to grow 31% year-over-year to $10.19 for the same period. It surpassed EPS estimates in all the four trailing quarters. TMUS’ shares have gained 4.4% over the past three months to close the last trading session at $134.13.
TMUS’ POWR Ratings reflect this optimistic outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TMUS has a B grade for Growth and Stability. Within the Telecom - Domestic industry, it is ranked #7 out of 18 stocks. Click here for the additional POWR Ratings for Value, Sentiment, Momentum and Quality for TMUS.
Stock #2: Verizon Communications Inc. (VZ)
VZ offers communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. It operates through two segments: Consumer and Business.
VZ’s forward EV/EBIT multiple of 10.74 is 30.6% lower than the industry average of 15.48. Its forward non-GAAP P/E multiple of 7.26 is 52% lower than the industry average of 15.12.
VZ’s trailing-12-month net income margin of 15.58% is 277.4% higher than the industry average of 4.13%. Its trailing-12-month ROCE of 23.22% is 463.3% higher than the industry average of 4.12%.
VZ’s service revenues and other, increased marginally year-over-year to $27.32 billion for the second quarter that ended June 30, 2023. Also, its total operating expenses came in at $25.38 billion, down 3.3% year-over-year.
VZ’s total current liabilities came in at $51.40 billion for the period that ended June 30, 2023, compared to $50.17 billion for the period that ended December 31, 2022. Its total assets came in at $379.96 billion, compared to $379.68 billion for the same period.
Analysts expect VZ’s revenue to increase marginally year-over-year to $135.86 billion for the year ending December 2024. Its EPS is expected to come in at $4.70 for the same period. The stock has gained 4.8% over the past month to close the last trading session at $34.18.
VZ has a B grade for Stability. It is ranked #6 in the same industry.
Beyond what is stated above, we’ve also rated VZ for Growth, Value, Momentum, Sentiment and Quality. Get all VZ ratings here.
Stock #1: ATN International, Inc. (ATNI)
ATNI through its subsidiaries, provides telecommunications services to retail and business customers worldwide. The company operates through International Telecom and US Telecom segments.
ATNI’s forward EV/EBIT multiple of 78.17 is 406% lower than the industry average of 15.45. Its forward EV/Sales multiple of 1.67 is 13.1% lower than the industry average of 1.92.
ATNI’s trailing-12-month EBITDA margin of 22.98% is 24.3% higher than the industry average of 18.49%. Its trailing-12-month gross profit margin of 55.68% is 12.8% higher than the industry average of 49.37%.
During the fiscal second quarter that ended June 30, 2023, ATNI’s total revenue amounted to $186.44 million, up 3.9% year-over-year. Its adjusted EBITDA increased 9.7% year-over-year to $45.79 million. The company’s operating income grew 41.7% from its prior-year quarter to $2.44 million.
Street expects ATNI’s revenue to increase 4.4% year-over-year to $757.51 million for the year ending December 2023. Its EPS is expected to increase at 36.8% for the same period. Shares of ATNI has lost marginally intraday to close the last trading session at $33.27.
ATNI is ranked #4 in the same industry. It has a B grade for Growth, Stability and Sentiment. To see additional ATNI’s ratings for Value, Momentum and Quality, click here.
What To Do Next?
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TMUS shares were trading at $139.00 per share on Thursday morning, up $4.87 (+3.63%). Year-to-date, TMUS has declined -0.71%, versus a 17.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
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.
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