With technological advancements worldwide, there has been one considerable rollout of 5G wireless internet technology, ushering in a tidal wave of innovations across multiple sectors.
It’s transforming several sectors, from the Internet of Things (IoT) to automated automobiles and smart cities. 5G offers speedier data transmission and real-time communication capabilities, and hence, this enables new business models and increases efficiency.
Given this backdrop, it could be wise to consider investing in companies that are tapping into building and developing 5G networks, such as T-Mobile US, Inc. (TMUS), Verizon Communications Inc. (VZ), and QUALCOMM Incorporated (QCOM).
The demand for 5G-enabled devices and services is fast growing, prompting investments in network expansion and related technologies. The Federal Communication Commission (FCC) is to make up to $9 billion in Universal Service Fund support available to carriers to deploy advanced 5G mobile wireless services in Rural America.
Furthermore, the U.S. National Science Foundation Directorate for Technology, Innovation and Partnerships (TIP) has set aside a $25 million investment for 5G communication infrastructure.
BCG’s ongoing research suggests that by 2030, 5G is anticipated to have contributed $1.7 trillion to US economic growth. This offers a unique opportunity for investors to participate in this transformative shift. The global 5G services market size is anticipated to grow at a CAGR of 59.4% by 2030.
With that in mind, let’s examine the fundamentals of the above-mentioned stocks in detail:
T-Mobile US, Inc. (TMUS)
TMUS is a provider of mobile communications services, including voice, messaging, and data, under its flagship brands, T-Mobile and Metro by T-Mobile. It offers mobile communications services primarily using its 4G Long Term Evolution (LTE) network and its 5G technology network.
On August 6, TMUS introduced Partner Plus, a new channel subsidy program aimed to make it more cost-effective and accessible for businesses to experience the benefits of 5G laptops and 5G business internet. Hardware costs can be a significant barrier to entry for many businesses, and by reducing costs, TMUS is making 5G more accessible to all organizations.
For the second quarter of 2024, which ended on June 30, TMUS’ total revenues increased 3% year-over-year to $19.77 billion, while its postpaid service revenues increased 6.9% year-over-year to $12.90 billion.
The company’s adjusted EBITDA for the quarter amounted to $8.05 billion, representing an increase of 8.8% year-over-year, with its net income per share growing 33.9% from the prior year’s quarter to $2.49. Also, TMUS’ adjusted free cash flow grew 54.3% from the year-ago value to $4.44 billion.
Building on this quarter's momentum and successful acquisition, the company updated its guidance for 2024. TMUS now anticipates that the full-year core adjusted EBITDA will range between $31.50 billion and $31.80 billion. It also forecasts adjusted free cash flow in the range of $16.60 billion to $17 billion and postpaid net customer additions to be between 5.4 million and 5.7 million.
The consensus revenue estimate of $20.08 billion for the fiscal third quarter (ending September 2024) represents a 4.3% increase year-over-year. The consensus EPS estimate of $2.47 for the current quarter indicates a 23.6% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past year, the stock has surged 44.5%, closing the last trading session at $202.41.
TMUS’ POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TMUS has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #3 out of 18 stocks in the Telecom - Domestic industry. Click here to see the additional ratings for TMUS (Value and Momentum).
Verizon Communications Inc. (VZ)
VZ is a holding company that, through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies. It operates through two segments: Verizon Consumer Group and Verizon Business Group.
On September 9, VZ announced that it would acquire Frontier Communications Parent, Inc. (FYBR) for a $20 billion cash deal. This acquisition will considerably expand VZ’s fiber footprint and intelligent edge network for digital innovations like AI and IoT across the nation to current as well as new customers. FYBR’s 2.2 million fiber subscribers will be joining VZ’s connections.
On September 4, buoyed by strong financial performance, the company increased its quarterly dividend by $0.0125 to $0.6775 per share, payable to its shareholders on November 1, 2024.
VZ has raised its annual dividend for 18 consecutive years. It pays an annual dividend of $2.71, which translates to a yield of 6.19% at the current share price. Its four-year average dividend yield is 5.81%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 2% over the past five years.
In the fiscal second quarter that ended on June 30, 2024, VZ’s total operating revenues increased marginally year-over-year, amounting to $32.80 billion. Its operating income rose 8.3% from the year-ago value to $7.82 billion. The company’s consolidated adjusted EBITDA came in at $12.30 billion, up 2.8% year-over-year, and its EPS stood at $1.09.
In addition, its retail postpaid phone net additions are 148,000, and retail postpaid net additions are 340,000.
According to VZ’s guidance and outlook for its fiscal year 2024, it is projecting adjusted EBITDA to grow between 1% to 3%. Additionally, its adjusted EPS guidance ranges from $4.50 to $4.70. The company also expects total wireless services revenue growth to range between 2% and 3.5%.
Street expects VZ’s revenue for the fiscal fourth quarter (ending December 2024) to increase marginally year-over-year to $35.54 billion. Its EPS for the same period is expected to register a 2.1% growth from the prior year, settling at $1.10. In addition, it surpassed the consensus EPS estimates in three of the trailing four quarters, which is promising.
The stock has gained 28.9% over the past year and 17.6% over the past nine months to close the last trading session at $43.86.
It’s no surprise that VZ has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Stability. Out of 18 stocks in the Telecom - Domestic industry, VZ is ranked #5.
Beyond what is stated above, we’ve also rated VZ for Growth, Value, Momentum, Sentiment, and Quality. Get all VZ ratings here.
QUALCOMM Incorporated (QCOM)
QCOM engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On July 17, the company’s board of directors approved a quarterly dividend of $0.85 per share. The dividend will be paid on September 26, 2024, to its shareholders.
With 20 years of consecutive dividend growth, QCOM pays an annual dividend of $3.40 per share, which translates to a yield of 2.04% on the prevailing share price. Also, its four-year average dividend yield is 2.10%.
QCOM's revenues for the third quarter (ended June 23, 2024) increased 11.1% year-over-year to $9.39 billion. The company reported a non-GAAP operating income of $3.02 billion, indicating a 19.7% growth from the prior year's quarter. QCOM’s non-GAAP came in at $2.65 billion, up 25.8% year-over-year, while its net income per share grew 24.6% from the prior-year quarter to $2.33.
Looking ahead, QCOM anticipates full-year service revenue for the fiscal year 2024 to fall between $9.50 billion and $10.30 billion, and QCT segment and QLT segment revenues are anticipated to be in the range of $8.10 billion-$8.70 billion and $1.35 billion-$1.55 billion, respectively. The company also projects non-GAAP EPS to range from $2.45 to $2.65.
Analysts expect QCOM’s revenue for the second quarter (ending September 2024) to increase 13.8% year-over-year to $9.86 billion, while its EPS for the same period is expected to grow 26.1% from the prior year’s period to $2.55. Moreover, the stock has topped the EPS and revenue estimates in all four trailing quarters, which is excellent.
QCOM shares have surged 48.3% over the past year to close the last trading session at $164.98.
QCOM’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Quality. Within the same Semiconductor & Wireless Chip industry, it is ranked #2 out of 91 stocks. Click here to see QCOM’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
TMUS shares were trading at $202.80 per share on Friday afternoon, up $0.39 (+0.19%). Year-to-date, TMUS has gained 27.89%, versus a 18.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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