Despite macroeconomic obstacles, the telecom industry has been able to sustain development by capitalizing on the high consumer demand. Amid ongoing innovation and growing adoption of next-generation technology, investors could consider adding quality telecom stocks Verizon Communications Inc. (VZ), IDT Corporation (IDT), Ooma, Inc. (OOMA), and Spok Holdings, Inc. (SPOK) to their watchlist in 2023.
The telecommunications business has reinvented itself, from the days of fixed landlines to the introduction of smartphones. With continuing digital transformation and hybrid lifestyles, the industry has been growing as companies boost their services to deliver high-speed network connectivity.
Moreover, the wireless telecommunications service industry is expanding rapidly due to the expansion of cellular networks and wearables and the penetration of information and communication technology. The wireless telecommunication service market is predicted to grow at a CAGR of 7.4% until 2030.
Therefore, fundamentally sound telecom stocks VZ, IDT, OOMA, and SPOK could soar in the coming months.
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 February 12, 2023, VZ announced that its newest data plan, 50 Mbps Verizon Fios service, will be available in Boston to assist small business owners in the Boston area in gaining high-speed internet access. This should enhance the company's income streams.
In terms of forward EV/EBITDA, VZ is currently trading at 7.13x, 15.7% lower than the industry average of 8.46x. Its forward Price/Book of 1.58x is 20.6% lower than the industry average of 1.99x.
VZ's trailing-12-month gross profit margin of 56.79% is 14.4% higher than the 49.63% industry average. Its trailing-12-month net income margin of 15.53% is 355% higher than the 3.41% 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. Also, its net income increased 41.4% year-over-year to $6.70 billion. VZ's EPS came in at $1.56, reflecting an increase of 40.5% from the prior-year quarter.
VZ's revenue is expected to increase marginally year-over-year to $137.76 billion in 2023. Its EPS is expected to increase marginally per annum for the next five years. VZ's shares have lost marginally to close the last trading session at $38.30.
VZ's strong fundamentals are reflected in its POWR Ratings. The stock's overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VZ has a B grade for Value, Stability, and Quality. In the Telecom - Domestic industry, it is ranked #4 out of 20 stocks. Click here for the additional POWR Ratings for Growth, Momentum, and Sentiment 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.
On February 23, 2023, IDT announced Zendit, a cloud-based prepaid-as-a-service platform. Zendit provides unique prepaid solutions to satisfy the demands of enterprises and organizations of all sizes while assuring uptime and availability. This should be a significant addition to its portfolio.
In terms of trailing-12-month EV/EBITDA, IDT is currently trading at 8.83x, 8.6% lower than the industry average of 9.66x. Its trailing-12-month Price/Sales of 0.59x is 54.8% lower than the industry average of 1.32x.
IDT's trailing-12-month ROCE of 23.99% is 542.7% higher than the 3.73% industry average. Its trailing-12-month ROTA of 8.26% is 366.4% higher than the 1.77% industry average.
IDT's operating income 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.
Moreover, its EPS came in at $0.43, compared to a loss per share of $0.10 in the prior year period. Also, its adjusted EBITDA amounted to $24.30 million, up 32.1% year-over-year.
The stock has gained 19.6% over the past six months to close the last trading session at $30.33.
IDT's robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It has an A grade for Growth and a B for Value and Stability. It is ranked #3 in the same industry. For additional POWR Ratings for Sentiment, Momentum, and Quality for IDT, click here.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies for businesses and consumers in the United States and Canada. The company's products and services include Ooma Office, Ooma Office Pro, Ooma Connect, Ooma Enterprise, Ooma AirDial, Ooma Premier, and Ooma Telo Air.
In terms of forward EV/Sales, OOMA is currently trading at 1.45x, 25.5% lower than the industry average of 1.95x.
OOMA's trailing-12-month gross profit margin of 63.05% is 27% higher than the 49.63% industry average. Its trailing-12-month asset turnover ratio of 1.81% is 286.7% higher than the 0.47% industry average.
OOMA's total revenue increased 15.3% year-over-year to $56.78 million for the third quarter that ended October 30, 2022. Its subscription and services revenues came in at $51.75 million, up 15.9% year-over-year. Moreover, its gross profit came in at $35.92 million, representing an 18.8% year-over-year rise.
The consensus revenue estimate of $216.09 million for the fiscal year 2023 indicates a 12.4% increase year-over-year. Its EPS is expected to grow 3.9% year-over-year to $0.53 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past six months, the stock has gained 12.2% to close the last trading session at $13.07.
OOMA's POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. It has a B for Value, Stability, Growth, and Sentiment. It is ranked #2 in the same industry.
Beyond what is stated above, we've also rated OOMA for Momentum and Quality. Get all OOMA ratings here.
Spok Holdings, Inc. (SPOK)
SPOK provides healthcare communication solutions worldwide. It delivers clinical information to care teams to enhance patient outcomes. The company offers subscriptions to one-way or two-way messaging and ancillary services and sells devices to resellers.
In terms of forward EV/Sales, SPOK is currently trading at 1.42x, 27.4% lower than the industry average of 1.95x. Its trailing-12-month EV/EBITDA of 7.74x is 8.5% lower than the industry average of 8.46x.
SPOK's trailing-12-month gross profit margin of 67.52% is 36% higher than the 49.63% industry average. Its trailing-12-month asset turnover ratio of 0.55% is 16.9% higher than the 0.47% industry average.
SPOK's operating income came in at $2.96 million for the fourth quarter that ended December 31, 2022, compared to a loss of $20.81 million in the year-ago period. Its net income came in at $24.23 million compared to a net loss of $16.67 million for the same period. Also, its EPS came in at $1.21 compared to a loss per share of $0.86 in the previous year.
Analysts expect SPOK's revenue to increase marginally year-over-year to $132.43 billion in 2024. EPS is estimated to grow 4.5% year-over-year to $0.93 in 2024. Over the past nine months, the stock has gained 45.4% to close the last trading session at $10.30.
It's no surprise that SPOK has an overall A rating which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth, Sentiment, and Quality and a B for Value. The stock is ranked first in the same industry. We've also rated SPOK for Stability and Momentum. Get all SPOK ratings here.
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VZ shares were unchanged in premarket trading Thursday. Year-to-date, VZ has declined -1.47%, versus a 2.80% 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.
4 Telecom Stocks to Buy or Add to Your Watchlist in 2023 StockNews.com
