The growth of the telecom industry is being driven by rising demand from individuals as well as enterprises. As post-pandemic hybrid working conditions continue to prevail, wireless carriers are expanding their services to include home internet through fixed-wireless access on their 5G networks, allowing seamless communication and user experience.
Moreover, enterprises' fast adoption of the Internet of Things (IoT) and cloud computing is driving the demand for high-speed data services. Telecom companies are capitalizing on the tailwinds by deploying 5G networks.
Moreover, President Biden’s Bipartisan Infrastructure Law provides a $65 billion investment to expand high-speed internet in communities across the country. Investor’s interest in telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 2% returns over the past three months.
The global telecom market is expected to grow at a CAGR of 7.4% to $3.82 trillion by 2026.
Given this backdrop, it could be wise to invest in fundamentally strong telecom stocks Verizon Communications Inc. (VZ), AT&T Inc. (T), Ooma, Inc. (OOMA), and Spok Holdings, Inc. (SPOK).
Verizon Communications Inc. (VZ)
VZ offers communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates through two segments: Consumer and Business.
On October 13, 2022, VZ reported that they recently began moving customer traffic onto Verizon’s new 5G core, offering unprecedented levels of service agility, flexibility, and automated scalability.
Adam Koeppe, Senior Vice President of Network Technology, Strategy, and Planning at Verizon, said, “The 5G Core is a critical step in achieving our goal. We are working to ensure customers not only have access to 5G but have the most advanced, secure, and robust network to support the remarkable new solutions being developed on 5G technology.”
During the second quarter of the fiscal year 2022 ended June 30, VZ’s total operating revenues grew marginally year-over-year to $33.79 billion. The company’s wireless equipment revenues rose 20.4% from the year-ago value to $6.67 billion. Also, its total assets came in at $370.15 billion as of June 30, 2022, compared to $366.60 billion for the fiscal year ended December 31, 2021.
Analysts expect VZ’s revenue for the quarter ended September 30, 2022, to increase 2.7% year-over-year to $33.82 billion. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has declined 28.6% to close the last trading session at $37.07.
VZ’s POWR Ratings reflect this positive outlook. VZ has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
Within the Telecom - Domestic industry, it is ranked #3 among 20 other stocks. The company has a B grade for Stability.
Click here to see the additional POWR ratings of VZ for Growth, Value, Momentum, Sentiment, and Quality.
AT&T Inc. (T)
T is a leading telecommunications, media, and technology service provider worldwide. It offers wireless voice and data communications services; and sells handsets, wireless data cards, and a wide range of wireless devices.
On October 5, 2022, T announced the first locations to get AT&T Fiber as part of a countywide, $39 million network deployment.
AT&T CEO, John Stankey, said, "Combining public sector funding and private sector investment is the most cost-effective way to ensure more Americans are able to take advantage of robust connectivity. This type of public-private partnership can serve as a model to help close the digital divide once and for all."
For the second quarter ended June 30, 2022, T’s total operating expenses declined 12.3% year-over-year to $24.69 billion. T’s net income attributable to common stock increased 171.1% from the prior-year quarter to $4.11 billion. In addition, its EPS grew 154.5% year-over-year to $0.56.
T has a commendable earnings surprise history, surpassing the consensus EPS in each of the trailing four quarters. Over the past year, the stock has declined 18.4% to close the last trading session at $15.60.
T’s strong fundamentals are reflected in its POWR Ratings. T has an overall rating of B, which equates to a Buy in our proprietary rating system. It is ranked #4 in the same industry. It has a B grade for Value.
We have also given T grades for Growth, Momentum, Stability, Sentiment, and Quality. Get all T ratings here.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies for businesses and consumers in the United States and Canada. Its various products and services are Ooma Office, Ooma Connect, Ooma Managed Wi-Fi, Ooma Enterprise, and Ooma AirDial.
On September 1, 2022, OOMA announced its acquisition of OnSIP. The acquisition is expected to be accretive to OOMA’s adjusted EBITDA starting in the fourth quarter of the current fiscal year and make an increasing contribution to OOMA’s profitability and cash flows.
Eric Stang, CEO of OOMA, stated, “We believe the acquisition of OnSIP is complementary to our strategy to extend our leadership in serving SMB customers and will accelerate the overall growth of Ooma Business. We are also thrilled to expand our Ooma team with the addition of OnSIP’s highly experienced employees."
For the second quarter ended July 31, 2022, OOMA’s total revenue grew 11.9% year-over-year to $52.65 million. Its gross profit surged 15.4% from the prior-year quarter to $33.82 million. The company reported a net income of $338K, compared to a net loss of $439K in the year-ago period.
OOMA’s consensus revenue estimate of $56.20 million for the quarter ended October 31, indicates a 14.3% year-over-year improvement. Its EPS for the quarter ending April 30, 2022, is expected to increase 4.2% year-over-year to $0.13. Over the past three months, the stock has gained 40.5% to close the last trading session at $15.78.
OOMA’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which equates to a Buy. It is ranked first in the same industry. In addition, it has a B grade for Growth, Value, and Sentiment.
Click here to see OOMA's Momentum, Stability, and Quality ratings.
Spok Holdings, Inc. (SPOK)
SPOK provides healthcare communication solutions in the United States and worldwide. The company offers subscriptions to one-way or two-way messaging services, and ancillary services and sells devices to resellers. In addition, the company provides professional software license updates and product support services, as well as sells third-party equipment.
On April 25, 2022, SPOK announced that through its strong partnership with Tyto Athene, it would provide maintenance, support, and professional services for its communications solutions at 48 the United States Air Force, Air National Guard, Air Force Reserve, and Space Force bases globally.
Vincent D. Kelly, president and CEO of Spok Holdings, Inc., said, "As we enter our eighth year of providing these life safety systems at bases across the globe, we consider it a privilege to continue our support for such a crucial division in our country’s defense system."
In the fiscal 2022 second quarter ended June 30, SPOK’s operating expenses decreased 16.2% year-over-year to $31.29 million. Its operating income came in at $2.41 million, compared to an operating loss of $1.61 million in the previous-year quarter.
Furthermore, SPOK’s net income came in at $1.92 million, compared to a loss of $719K in the year-ago period. The company’s EPS came in at $0.10, compared to a loss per share of $0.04 in the prior-year quarter. In addition, its adjusted EBITDA came in at $3.69 million, compared to an adjusted EBITDA loss of $1.55 million.
Over the past three months, the stock has gained 21.4% to close the last trading session at $7.77.
SPOK’s strong fundamentals are reflected in its POWR Ratings. SPOK has an overall rating of B, which equates to a Buy in our proprietary rating system. It has an A grade for Growth. It is ranked #2 in the Telecom – Domestic industry.
To see the other ratings of SPOK for Value, Momentum, Stability, Sentiment, and Quality, click here.
VZ shares rose $0.03 (+0.08%) in after-hours trading Wednesday. Year-to-date, VZ has declined -25.77%, versus a -21.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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