Conglomerate Berkshire Hathaway (BRK.B), run by legendary investor Warren Buffett, liquidated its stake in Verizon Communications Inc. (VZ) in the second quarter of 2022.
VZ had a challenging second quarter. The company’s EBITDA and net income came in at $11.9 billion and $5.3 billion for the quarter, down 2.6% and 10.7% year-over-year, respectively. Also, its earnings per common share of $1.24 declined 11.4% year-over-year.
Given the recent performance and intense competition, VZ has been forced to revise its yearly guidance for adjusted EPS from $5.40-$5.55 to $5.10-$5.25. Such underwhelming prospects have probably prompted Berkshire to discard VZ from its holdings.
However, the telecom industry is well positioned to benefit from the substantial demand amid consistent digital transformations and hybrid lifestyles. Furthermore, increasing federal and corporate investments in 5G deployment should boost the industry’s growth. According to a report by Precedence Research, the global telecom market is expected to reach $2.65 trillion by 2030, growing at a CAGR of 4.9%.
Investors’ interest in the telecom sector is evident from the SPDR S&P Telecom ETF’s (XTL) 9.9% gains over the past month.
Thus, fundamentally strong and promising telecom stocks AT&T Inc. (T), Ooma Inc. (OOMA), and Spok Holdings Inc. (SPOK) could be ideal alternatives to consider buying now.
AT&T Inc. (T)
T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.
On August 8, T announced that it delivered ‘FirstNet and Family,’ a simplified experience that gives America’s first responders the best of 2 networks – public safety of the FirstNet network and the AT&T commercial network – to keep their worlds connected. This should help T continue to witness growing demand from various agencies and organizations.
On August 5, T and Warner Bros. Discovery Inc. (WBD) announced an agreement that will allow AT&T to continue to offer internet and mobility customers access to HBO Max’s portfolio of original programming and series. "HBO Max is a great product that is popular with our customers, and we like that we're viewed as the place to come to get it," said Jenifer Robertson, EVP & General Manager - Mass Markets.
For its fiscal 2022 second quarter ended June 30, 2022, T’s revenues from the Latin America segment increased 17.4% year-over-year to $808 million. Its operating expenses reduced 12.4% year-over-year to $24.69 billion. As a result, net income increased 142.1% year-over-year to $4.54 billion. The earnings per share attributable to common stock increased 154.5% year-over-year to $0.56 during the same period.
The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. Over the past six months, the stock has gained 1.8%to close the last trading session at $18.06.
T’s POWR Ratings reflect this stable outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Value. T is ranked #3 of 20 stocks in the Telecom – Domestic industry.
Click here to access the additional ratings for T’s Stability, Growth, Quality, Sentiment, and Momentum.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies to businesses and residential customers in the United States and Canada. The company’s offerings include Ooma Business, Ooma Office, Ooma Enterprise, and Ooma AirDial. It offers its products through direct sales, distributors, retailers, and resellers, as well as online.
This month, OOMA’s Ooma AirDial solution focused on replacing obsolescent copper-wire phone lines was named Best Endpoint Product for 2022 in the prestigious UC Awards. This accolade is expected to boost sales in the coming months.
In May, OOMA announced the launch of Ooma Office Pro Plus, which would enable businesses of all sizes to quickly and affordably set up a simple call center, integrate with the Salesforce CRM platform, and provide hot-desking capability in their offices, and more. The new launch might accelerate the company’s growth and profitability.
OOMA’s net sales for the fiscal 2023 first quarter ended April 30, 2022, increased 10.5% year-over-year to $50.34 million. The company’s non-GAAP gross profit came in at $32.27 million, up 13.5% from the prior-year period. Its non-GAAP operating income came in at $3.01 million, indicating a 12% rise from the year-ago period.
In addition, OOMA’s non-GAAP net income came in at $3 million, representing an 8.5% year-over-year improvement. Its non-GAAP net income per share grew 9.1% from the year-ago period to $0.12.
Analysts expect the company’s revenue to come in at $212.05 million for the fiscal year 2023 (ending January 2023), representing a 10.3% rise from the prior year. Also, the following year’s consensus revenue estimate of $234.47 million indicates an increase of 10.6% year-over-year.
Furthermore, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is indicative of its impressive earnings surprise history.
Over the past month, the stock has gained 14.1% to close the last trading session at $13.21.
OOMA’s POWR Ratings reflect its bright prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
OOMA has an A grade for Growth and a B for Value, Stability, and Sentiment. It tops the list of 20 stocks in the Telecom – Domestic industry.
To see additional POWR Ratings for Quality and Momentum for OOMA, click here.
Spok Holdings, Inc. (SPOK)
SPOK operates as a healthcare communication company in the United States, Europe, Canada, Australia, Asia, and the Middle East. Through its products and services, the company caters to three market segments: Healthcare; Government; and Large Enterprises.
On August 8, SPOK announced that 18 of the 20 adult hospitals and all ten children’s hospitals named to U.S. News & World Report’s 2022-23 Best Hospitals Honor Roll are all customers of SPOK. This reflects the company’s strong position as an industry leader in critical communications.
In the fiscal 2022 second quarter ended June 30, SPOK’s operating expenses decreased 16.2% year-over-year to $31.29 million. This has helped the company to report an operating income of $2.41 million for the quarter, 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 $719,000 in the same quarter of the previous year. The company’s earnings per share came in at $0.10, versus a loss of $0.04 per share in the prior-year quarter.
SPOK’s recovery is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our POWR Ratings system. SPOK has an A grade for Growth. In the same industry, it is ranked #2 among 20 stocks.
Click here to access the additional POWR Ratings for SPOK (Value, Momentum, Stability, Quality, and Sentiment).
VZ shares rose $0.01 (+0.02%) in after-hours trading Wednesday. Year-to-date, VZ has declined -13.06%, versus a -12.26% 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.
Buffett Dropped This Telecom Giant... But You Should Consider Adding These 3 Buy-Rated Alternatives StockNews.com
