The telecom market is expanding rapidly due to growing demand across various sectors and advancements in technologies like 5G, IoT, AI, and machine learning. Thus, investors could consider investing in top telecom stocks Millicom International Cellular S.A. (TIGO), Hellenic Telecommunications Organization S.A. (HLTOY), and Telefônica Brasil S.A. (VIV) right now.
The telecommunication sector offers crucial services on which billions of consumers rely daily. Moreover, due to rising global video traffic, the global data consumption over telecom networks is expected to grow from 3.4 million petabytes (PB) in 2022 to 9.7 million PB in 2027, while telecom providers are expected to invest $342.10 billion in their networks in 2027.
Furthermore, 5G wireless mobile services enable fast data speeds and low latency, facilitating various applications like VR gaming and smart home energy management. Partnerships between 5G system integration providers and telecom operators drive adoption, fostering advancements in connected vehicles and disaster communication.
As a result, the global 5G services market is projected to grow at a CAGR of 59.4% by 2030. 5G is also expected to capture a larger share of the telecom market, rising from one-tenth of all worldwide connections in 2022 to one-half by the end of this decade.
Besides, with multiple use cases across primary industry verticals, such as e-commerce, media and entertainment, IT and telecom, healthcare, and transportation and logistics, the global telecom market is poised to grow at a CAGR of 6.2% to reach $3.10 trillion by 2030.
Considering these conducive trends, let’s examine the fundamentals of three Telecom - Foreign stock picks, beginning with the third choice.
Stock #3: Millicom International Cellular S.A. (TIGO)
Based in Luxembourg, TIGO provides mobile and cable services, offering a wide range of products, including mobile data, voice, financial services, broadband, and pay-TV under the Tigo and Tigo Business brands. It caters to residential and business customers, delivering connectivity solutions across diverse markets.
On February 20, 2024, TIGO and Harmonic Inc. (HLIT) accelerated fiber deployment in Latin America, introducing XGS-PON FTTH services to enhance connectivity for residential and enterprise users under the TIGO® brand, utilizing HLIT's cOS® platform and hybrid fiber-cable nodes across nine countries in the region.
TIGO’s trailing-12-month CAPEX/Sales of 13.90% is 235.3% higher than the industry average of 4.15%. Its trailing-12-month cash from operations of $1.24 billion is 298.1% higher than the $311.99 million industry average.
TIGO’s revenue increased 2.6% year-over-year to $1.42 billion in the third quarter, which ended September 30, 2023. The company's gross profit and operating profit grew 4% and 6.6% from a year-ago quarter to $1.06 billion and $209 million, respectively. Also, its operating free cash flow for the same quarter rose 65% year-over-year to $297 million.
TIGO’s revenue and EPS are expected to grow 3.9% and 184.2% year-over-year to $5.88 billion and $1.30, respectively, for the fiscal year ending December 2024.
The stock has surged 5.8% over the past three months to close the last trading session at $16. It gained 1.1% intraday.
TIGO’s POWR Ratings reflect this strong outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Stability. In the A-rated Telecom - Foreign industry, it is ranked #12 among 44 stocks.
Click here to see TIGO’s ratings for Growth, Value, Momentum, Sentiment, and Quality.
Stock #2: Hellenic Telecommunications Organization S.A. (HLTOY)
Based in Athens, Greece, HLTOY delivers telecommunications services in Greece and Romania through segments like OTE and Telekom Romania Mobile. Its offerings include fixed-line, internet, TV production, mobile, satellite, and international carrier services, as well as ICT solutions and e-commerce services.
HLTOY’s trailing-12-month ROTA of 7.87% is 424.8% higher than the industry average of 1.50%. Its trailing-12-month CAPEX/Sales of 18.38% is 343.3% higher than the 4.15% industry average.
During the fiscal third quarter that ended September 29, 2023, HLTOY’s revenue and gross profit amounted to €881 million ($954.22 million) and €681.10 million ($737.71 million). Operating income came in at €204.80 million ($221.82 million). Moreover, net income stood at €150 million ($162.47 million) and €0.18 per share.
Street expects its revenue for the fiscal year ending December 2024, to grow 1.7% year-over-year to $3.79 billion.
The stock has gained 9% over the past three months to close the last trading session at $7.60. It gained 2.2% intraday.
HLTOY’s POWR Ratings reflect this robust outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B for Growth. In the same industry, it is ranked #9.
To access additional ratings for HLTOY’s Value, Momentum, and Sentiment, click here.
Stock #1: Telefônica Brasil S.A. (VIV)
Headquartered in São Paulo, Brazil, VIV is a leading mobile telecommunications company in Brazil, offering fixed-line and mobile services such as voice, broadband, data, pay TV, and digital solutions. It caters to various industries and markets its services through diverse channels.
VIV’s trailing-12-month CAPEX/Sales of 16.91% is 307.9% higher than the industry average of 4.15%. Its trailing-12-month cash from operations of $3.87 billion is significantly higher than the $311.99 million industry average.
During the fourth quarter of 2023, VIV’s net operating revenue grew 6.9% from a year-ago quarter to R$13.54 billion ($2.74 billion). The company's EBITDA and operating cash flow rose 9.9% and 25.9% from the previous-year quarter to R$5.75 billion ($1.16 billion) and R$3.46 billion ($699.13 million), respectively. Also, its EPS increased 42.6% year-over-year to R$0.97.
Analysts expect its revenue and EPS to grow 4.9% and 14.1% year-over-year to $11.09 billion and $0.70, respectively, for the fiscal year ending December 2024. The company surpassed its revenue estimates in each of the trailing four quarters, which is promising.
VIV’s shares have increased 49.9% over the past year and 37.5% over the past nine months to close the last trading session at $11.26. Also, it gained 4.3% intraday.
VIV’s optimistic fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B for Sentiment and Quality. Within the same industry, it is ranked #3.
In addition to the POWR Ratings stated above, access VIV’s Growth, Value, and Momentum ratings here.
What To Do Next?
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VIV shares were trading at $11.18 per share on Friday morning, down $0.08 (-0.71%). Year-to-date, VIV has gained 2.19%, versus a 7.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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