The telecom services industry witnessed a great surge in demand over the past two years owing to the continuing remote working environment. The telecom sector is growing quickly with increased wireless deployment and the adoption of advanced technologies, including 5G, to meet high consumer demand. Last November, the $1 trillion Infrastructure Investment and Jobs Act allocated $65 billion for broadband adoption and deployment. Increased government funding and incentives are expanding telecom infrastructure and services to remote parts of the country.
The current, dynamic technological environment provides immense growth opportunities for telecommunication companies. According to a report by The Business Research Company, the global telecom market is projected to reach $2.87 trillion in 2022, growing at an 8.5% CAGR. The market is expected to reach $3.82 trillion in 2026, growing at a 7.4% CAGR, driven by increased demand for telecom hardware and services for household and commercial applications.
Given the telecom industry’s promising growth prospects, we think it could be profitable to invest in quality telecom stocks Nippon Telegraph and Telephone Corporation (NTTYY) and América Móvil S.A.B. de C.V. (AMX). These stocks are trading near their 52-week highs and are expected to rally in the near term.
Nippon Telegraph and Telephone Corporation (NTTYY)
NTTYY offers fixed voice-related, mobile voice-related, IP communications, and system integration services in Japan and internationally. It is headquartered in Tokyo, Japan. The company operates through five segments: Mobile Communications Business; Regional Communications Business; Long Distance and International Communications Business; Data Communications Business; and Other Business.
In December, NTTYY, in cooperation with the University of Tokyo and RIKEN, developed an optical fiber-coupled quantum light source. This is crucial technology for realizing modularized quantum light sources toward the fault-tolerant large-scale universal optical quantum computer. This launch is expected to boost the company’s profitability.
In its fiscal year 2022 nine-month period ended Dec. 31, 2021, NTTYY's operating revenue increased 2.1% year-over-year to ¥8.92 trillion ($73.2 billion). The company’s operating income increased 2.5% year-over-year to ¥1.54 trillion ($12.65 billion). NTTYY’s profit rose 24% from its year-ago value to ¥1.03 trillion ($8.46 billion). Its earnings per share rose 27.7% year-over-year to ¥286.08.
The stock is currently trading 2.8% below its 52-week high of $30.84, which it hit on March 23, 2022. Shares of NTTYY increased 10.1% in price year-to-date and 11.3% over the past year. It closed yesterday’s trading session at $30.00.
NTTYY's POWR Ratings reflect this strong outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
NTTYY has an A grade for Stability and a B grade for Value. Within the A-rated Telecom - Foreign industry, it is ranked #7 of 46 stocks.
To see additional POWR Ratings (Quality, Sentiment, Momentum, and Growth) for NTTYY, click here.
América Móvil S.A.B. de C.V. (AMX)
Headquartered in Mexico City, Mexico, AMX provides telecommunications services in Latin America and internationally. The company provides wireless and fixed voice services, network interconnection services, data services, and other wireless entertainment and corporate services. In addition, AMX offers IT solutions, video, audio, media content, and residential broadband services.
Last September, AMX and Liberty Latin America Ltd. formed a joint venture by combining their respective Chilean operations, VTR and Claro Chile. With this joint venture, the parties involved expect significant operating benefits, associated value creation with run-rate synergies of more than $180 million within three years, and to develop additional revenue streams.
AMX's total revenue increased 7.7% year-over-year to Mex$227.32 billion ($11.27 billion) in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. Its adjusted EBITDA increased 8.9% year-over-year to Mex$82.87 billion ($4.11 billion). The company’s EBIT rose 36.7% year-over-year to Mex$47.81 billion ($2.37 billion). And AMX’s net income grew 263.4% year-over-year to Mex$135.59 billion ($6.72 billion). The company’s earnings per share rose 273.2% year-over-year to Mex$2.09.
Analysts expect AMX's EPS for its fiscal 2022 first-quarter, ending March 31, 2022, to come in at $0.35, representing a 1,080% rise year-over-year.
The stock is currently trading 3% below its 52-week high of $21.37, which it hit on Jan. 5, 2022. Over the past year, shares of AMX have gained 55% in price and improved 15.7% over the past six months. AMX closed yesterday's trading session at $20.75.
AMX's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Quality, Stability, Growth, and Value. Within the Telecom - Foreign industry, it is ranked #1 of 46 stocks.
To see additional component grades of POWR Ratings (Momentum and Sentiment) for AMX, click here.
NTTYY shares were trading at $29.60 per share on Friday afternoon, down $0.40 (-1.32%). Year-to-date, NTTYY has gained 7.99%, versus a -4.55% 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.
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