Continued digital transformation and remote lifestyles have been driving the demand for telecom services for better connectivity. Moreover, increasing investments to deploy 5G and increased accessibility in rural areas should drive the sector’s growth. The global telecommunications market is expected to grow at a 1.5% CAGR to reach $1.96 trillion by 2028.
Given the sector’s solid growth prospects and defensive nature, it could witness rising investor attention as the stock market is expected to remain under pressure on concerns over high inflation and aggressive policy tightening.
Investors’ interest in telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 14.8% gains over the past month versus SPDR S&P 500 Trust ETF’s (SPY) 10.8% returns. Therefore, quality telecom stocks AT&T Inc. (T) and Ooma, Inc. (OOMA) could be solid investments now.
AT&T Inc. (T)
T is a provider of telecommunications, media, and technical services worldwide. The company’s services and products include wireless communications, data/broadband and Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services. It has a 0.60 beta.
On August 8, 2022, T announced that it delivered 'FirstNet and Family,’ a simplified experience that gives America's first responders the best of 2 networks – public safety's FirstNet network and the AT&T commercial network – to keep their worlds connected.
Created following the 9/11 terrorist attacks, FirstNet provides superior security, truly dedicated coverage and capacity, and unique benefits. This should help T continue to witness growing demand from various agencies and organizations.
For its fiscal 2022 second quarter ended June 30, 2022, T’s net income increased 142.1% year-over-year to $4.54 billion. As of June 30, 2022, the company had $4.02 billion in cash and cash equivalents.
The stock surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past week, the stock has gained 0.8% to close the last trading session at $18.42.
T’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value. Click here to see the additional ratings for T’s Stability, Growth, Quality, Sentiment, and Momentum. T is ranked #3 of 20 stocks in the Telecom - Domestic industry.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies to businesses of all sizes and residential customers through smart cloud-based software as a service platform in the United States and Canada. It offers its products through direct sales, distributors, retailers, and resellers, as well as online. It has a 0.69 beta.
On August 2, 2022, OOMA’s Ooma AirDial solution focused on replacing obsolescent copper-wire phone lines was named Best Endpoint Product for 2022 in the prestigious UC Awards.
AirDial delivers both immediate savings and long-term protection from the “copper sunset” of POTS through an easy installation and management solution. This award should help AirDial witness higher demand in the coming months.
OOMA’S net sales for its fiscal 2023 first quarter ended April 30, 2022, increased 10.5% year-over-year to $50.34 billion. The company’s non-GAAP gross profit came in at $32.27 million, up 13.5% from the prior-year period. Its non-GAAP income from operations came in at $3.01 million for the quarter, indicating a 12% rise from the year-ago period.
OOMA’s non-GAAP net income came in at $3 million, representing an 8.5% year-over-year improvement. Its non-GAAP EPS grew 9.1% from the year-ago period to $0.12. The company had $21.65 million in cash and cash equivalents as of April 30, 2022.
Analysts expect the company’s revenue to come in at $212.04 million for its fiscal 2023 ending January 31, 2023, representing a 10.3% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Its EPS is expected to grow at a 47.7% rate per annum over the next five years. Over the past week, the stock has gained 1% to close the last trading session at $13.41.
OOMA’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Stability, and Sentiment. In addition to the POWR Ratings grades we have just highlighted, one can see OOMA’s Quality and Momentum ratings here. OOMA is ranked first in the same industry.
T shares fell $0.04 (-0.22%) in after-hours trading Thursday. Year-to-date, T has gained 4.11%, versus a -9.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
The 2 Best Telecom Stocks to Buy for August StockNews.com
