Verizon Communications Inc. (VZ) and its subsidiaries offer communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. Its segments are Consumer and Business.
On the other hand, Globalstar, Inc. (GSAT) provides mobile satellite services worldwide. The company offers duplex two-way voice and data products, including mobile voice and data satellite communications services and equipment.
Despite the current market downtrend, the iShares U.S. Telecommunications ETF (IYZ) has gained 5% over the past month, indicating investors’ interest in telecom stocks. The telecom industry has seen a dramatic increase in investment with the growing integration of 5G, big data, and cloud computing.
The telecommunications services market is estimated to grow at a CAGR of 6.2% from 2022 to 2032. Moreover, according to Statista, 5G subscriptions are projected to hit $4 billion in 2027 from 12 million in 2019. Therefore, both VZ and GSAT should benefit from the industry trends.
VZ has lost 28.8% over the past year, while GSAT has gained 19.8%. Also, VZ has gained marginally over the past month versus GSAT's 13.6% gains. But which of these stocks is the better pick now? Let's find out.
Latest Developments
Yesterday, Synchronoss Technologies, Inc. (SNCR), a global leader and innovator in cloud, messaging, and digital products and platforms, announced that it is adopting VZ’s next-generation private cloud infrastructure. VZ has been expanding its offerings, and this partnership demonstrates its solid position in the industry.
On the other hand, on November 3, 2022, Dave Kagan, GSAT’s CEO, said, “Globalstar is now well positioned as a next-generation telecom infrastructure provider, offering long-term connectivity solutions to customers from space and over terrestrial networks, with stable cash flows that will drive innovation and growth into the future.”
Recent Financial Results
VZ’s total operating revenues came in at $34.24 billion for the third quarter ended September 30, 2022, up 4% year-over-year. Its wireless equipment revenues came in at $6.58 billion, up 22.9% year-over-year. The company’s EPS came in at $1.17, down 24.5% year-over-year. However, its segment EBITDA increased marginally year-over-year to $10.58 billion.
GSAT’s total revenue came in at $37.63 million for the third quarter that ended September 30, 2022, up 15.4% year-over-year. However, its subscriber equipment sales came in at $4.33 million, down 9.3% year-over-year. Its net loss came in at $204.36 million, up 561.7% year-over-year, while its loss per share came in at $0.11, up 450% year-over-year.
Past and Expected Financial Performance
VZ’s revenue increased at a marginal CAGR over the past three years. Its revenue is expected to increase 2.5% year-over-year to $137 billion in 2022 and marginally year-over-year to $138.98 billion in 2023. Its EPS is expected to increase by 2.2% per annum for the next five years. It surpassed EPS estimates in three of four trailing quarters.
On the other hand, GSAT’s revenue increased at a 2.4% CAGR over the past three years. Its revenue is expected to grow 24% year-over-year to $154.13 million in 2022 and 36.1% year-over-year to $209.77 million in 2023. Its EPS is expected to increase by 15% per annum for the next five years.
Profitability
VZ’s 56.97% gross profit margin is higher than GSAT’s 54.90%. Its EBITDA margin of 32.02% is higher than GSAT’s 25.03%. In addition, VZ’s ROE, ROA, and ROTC of 23.66%, 0.06%, and 6.37%, are higher than GSAT’s negative 105.83%, 0.06%, and 6.36%, respectively.
Thus, VZ is more profitable here.
Valuation
In terms of forward EV/Sales, VZ’s 2.44x is lower than GSAT’s 26.90x. Its forward EV/EBITDA of 6.96x is 91.3% lower than GSAT’s 79.69x. Moreover, VZ’s trailing-12-month Price/Sales of 1.15x is lower than GSAT’s 25.38x.
Thus, VZ is a relatively affordable stock here.
POWR Ratings
VZ has an overall rating of B, equating to Buy in our proprietary POWR Ratings system. On the other hand, GSAT has an overall D rating, which translates to Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
VZ has a C grade for Value. Its forward EV/Sales of 2.44x is 34% higher than the industry average of 1.82x, while its forward Price/Sales of 1.14x is 5.2% lower than the industry average of 1.20x.
On the other hand, GSAT has an F grade for Value. Its forward EV/Sales of 26.90x is 1,375.5% higher than the industry average of 1.82x. Also, its forward Price/Sales of 24.25x is 1,913.5% higher than the industry average of 1.20x.
VZ has a B grade for Stability, consistent with its 24-month beta of 0.26. On the other hand, GSAT has a C grade for Stability, consistent with its 24-month beta of 1.40.
Of the 20 stocks in the Telecom – Domestic industry, VZ is ranked #2. On the other hand, GSAT is ranked #13.
Beyond what we’ve stated above, we have also rated the stocks for Growth, Momentum, Sentiment, and Quality. Click here to view VZ ratings. Get all GSAT ratings here.
The Winner
Robust demand for telecom goods and services should bode well for VZ and GSAT. However, VZ’s relatively lower valuation and higher profitability make it a better buy here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Telecom – Domestic industry here.
VZ shares were trading at $37.37 per share on Tuesday morning, up $0.18 (+0.48%). Year-to-date, VZ has declined -24.14%, versus a -18.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
VZ vs. GSAT: Which Telecom Stock Is a Better Buy? StockNews.com
