The telecom sector's future is bright, driven by wireless network adoption, infrastructure investments, the expansion of 5G and anticipation of 6G, personalized customer experiences, and robust mergers and acquisitions. In addition, the strong market competition further fuels the sector's growth.
With the industry's growth in 5G networks, digital economy, and smart device usage, investing in strong telecom stocks such as AT&T Inc. (T), Verizon Communications Inc. (VZ), and T-Mobile US, Inc. (TMUS) could be wise.
Telecom is essential for on-demand connectivity, enabling seamless communication and digital transformation. In the U.S., the industry thrives due to the digital economy's growth and the rise in smartphone and smart electronics usage, alongside innovations in digitalization, cybersecurity, AI, and cloud computing. The global telecom market is expected to grow annually by 6.2%, reaching $3.10 trillion by 2030.
Furthermore, cloud technology is driving telecom organizations to migrate online, fueling market growth. The U.S. telecom market is projected to grow at a CAGR of 3.7% until 2028. AI is transforming the sector by streamlining network management, with global AI use in telecom expected to reach $21.20 billion by 2030, growing annually at 40.4%.
Considering these conducive trends, let’s analyze the fundamentals of the three stocks from the Telecom - Domestic industry, beginning with the third choice.
Stock #3: AT&T Inc. (T)
T provides telecommunications and technology services worldwide. The company operates through two segments: Communications and Latin America. It operates in the Communications segment and the Latin America segment.
On May 15, 2024, T and AST SpaceMobile entered a definitive commercial agreement to provide a space-based broadband network directly to everyday cell phones, extending until 2030, marking a significant step towards enhanced connectivity across the U.S.
In terms of the trailing-12-month Return on Common Equity, T’s 13.15% is 317.8% higher than the 3.15% industry average. Its 11.13% trailing-12-month net income margin is 277.1% higher than the 2.95% industry average. Likewise, the stock’s 5.90% trailing-12-month Return on Total Capital is 65.6% higher than the 3.56% industry average.
For the first quarter ended March 31, 2024, T's total operating revenues stood at $30.03 billion. Its adjusted operating income rose marginally year-over-year to $6.01 billion, and adjusted EPS came in at $0.55, respectively.
T's adjusted EBITDA came in at $11.05 billion, up 4.3% year-over-year. In addition, as of March 31, 2024, its total current liabilities amounted to $44.83 billion, compared to $51.13 billion as of December 31, 2023.
Analysts expect T’s revenue for the quarter ending June 30, 2024, to increase marginally year-over-year to $29.99 billion. Its EPS for fiscal 2025 is expected to grow 2.7% year-over-year to $2.27. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, T’s stock has gained 17.9% to close the last trading session at $18.40.
T’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value. Within the Telecom - Domestic industry, it is ranked #6 out of 17 stocks. To see T’s Growth, Momentum, Stability, Sentiment, and Quality ratings, click here.
Stock #2: Verizon Communications Inc. (VZ)
VZ provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments: Verizon Consumer Group (Consumer), and Verizon Business Group (Business).
In terms of the trailing-12-month EBITDA margin, VZ’s 35.83% is 92.5% higher than the 18.62% industry average. Its 12.82% trailing-12-month Capex / Sales is 251% higher than the 3.65% industry average. Likewise, the stock’s 22.60% trailing-12-month EBIT margin is 159.2% higher than the 8.72% industry average.
VZ’s total revenues for the fiscal first quarter that ended March 31, 2024, increased marginally year-over-year to $32.98 billion. The company’s net income attributable to VZ and earnings per common share stood at $4.60 billion and $1.09, respectively. In addition, its total current assets as of March 31, 2024, stood at $37.96 billion, compared to $36.81 billion as of December 31, 2024.
For the quarter ending June 30, 2024, VZ’s revenue is expected to increase 1.2% year-over-year to $33 billion. Its EPS for the quarter ending December 31, 2024, is expected to increase 1.7% year-over-year to $1.10. VZ surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 20.9% to close the last trading session at $40.24.
VZ’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Stability. It is ranked #5 in the same industry. Click here to see VZ’s Growth, Value, Momentum, Sentiment, and Quality ratings.
Stock #1: T-Mobile US, Inc. (TMUS)
TMUS and its subsidiaries provide 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 postpaid, prepaid, wholesale, and other services.
On June 20, 2024, TMUS is partnering with SailGP to enhance the Mubadala New York Sail Grand Prix with 5G technology, offering real-time insights and AR experiences for fans.
This collaboration showcases TMUS’ 5G Advanced Network Solutions, elevating the spectator experience through enhanced data transmission and engagement during the high-speed sailing competition.
On June 13, 2024, TMUS Advertising Solutions announced an exclusive partnership with Uber, expanding Uber’s JourneyTV offering to over 50,000 screens in rideshare vehicles and creating a new opportunity for advertisers to engage with Uber riders during trips.
In terms of the trailing-12-month Capex / Sales, TMUS’ 12.01% is 228.7% higher than the 3.65% industry average. Its 4.24% trailing-12-month Return on Total Assets is 240.4% higher than the 1.25% industry average. Likewise, the stock’s 13.57% trailing-12-month Return on Common Equity is 331% higher than the 3.15% industry average.
In the fiscal first quarter that ended March 31, 2024, TMUS' total services revenues rose 3.5% over the prior-year quarter to $16.10 billion, while its adjusted EBITDA stood at $7.65 billion, up 6.3% from the year-ago quarter. For the same quarter, its net income and EPS increased 22.4% and 26.6% year-over-year to $2.37 billion and $2, respectively.
Street expects TMUS’ EPS and revenue for the quarter ending June 30, 2024, to increase 10.6% and 2.2% year-over-year to $2.26 and $19.61 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 33.2% to close the last trading session at $176.73.
It’s no surprise that TMUS has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has a B grade for Growth, Stability, and Quality. It is ranked #4 in the Telecom – Domestic industry. Beyond what we stated above, we also have given TMUS grades for Value, Momentum, and Sentiment. Get all the TMUS ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TMUS shares were trading at $178.30 per share on Monday morning, up $1.57 (+0.89%). Year-to-date, TMUS has gained 12.08%, versus a 15.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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