The telecom industry provides stable returns due to its essential services and reliable cash flows. It is growing rapidly by defending core businesses, optimizing costs through next-gen networks, and leveraging AI to transform operations and customer experiences. These strategies have led telecom businesses to create significant value despite broader industry challenges.
To that end, investors looking for consistent returns might consider investing in strong telecom stocks such as Verizon Communications Inc. (VZ), AT&T Inc. (T), and IDT Corporation (IDT).
The telecom sector thrives due to wireless network adoption, infrastructure investments, and the expansion of 5G, along with the excitement over the vision of faster 6G technology. The U.S., as a leading digital economy, benefits from rising smartphone use and digital services.
Alongside, AI enhances telecom by boosting operational efficiency, enhancing customer experiences, and expanding data center demands. Companies leverage AI for broader market reach and improved service delivery, making telecom a promising investment with significant return potential. The global AI in telecommunications market is expected to reach $21.20 billion by 2030, growing at a 40.4% CAGR.
The US telecom industry is advancing with a shift towards cloud technology, driving online migration and market expansion. The U.S. telecom market is projected to grow at a CAGR of 3.7% until 2028. In addition, the global telecom market is projected to grow by 6.2% annually, reaching $3.10 trillion by 2030.
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: 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 94.3% higher than the 18.44% industry average. Its 12.82% trailing-12-month Capex / Sales is 258.4% higher than the 3.58% industry average. Likewise, the stock’s 22.60% trailing-12-month EBIT margin is 149.2% higher than the 9.07% 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 ended June 30, 2024, VZ’s revenue is expected to increase 1.4% year-over-year to $33.04 billion. Its EPS for the quarter ending December 31, 2024, is expected to increase 2.3% year-over-year to $1.11. VZ surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 31.3% to close the last trading session at $41.30.
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. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability. It is ranked #5 out of 17 stocks in the Telecom - Domestic industry. Click here to see VZ’s Growth, Value, Momentum, Sentiment, and Quality ratings.
Stock #2: 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 finalized a commercial agreement to deliver satellite-based broadband directly to regular cell phones until 2030. This agreement marks a significant advancement in improving connectivity across the U.S.
In terms of the trailing-12-month Return on Common Equity, T’s 13.15% is 278.3% higher than the 3.48% industry average. Its 11.13% trailing-12-month net income margin is 289.7% higher than the 2.86% industry average. Likewise, the stock’s 5.90% trailing-12-month Return on Total Capital is 63% higher than the 3.62% 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 ended 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 nine months, T’s stock has gained 27.7% to close the last trading session at $18.86.
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.
It has a B grade for Value. Within the same industry, it is ranked #4. To see T’s Growth, Momentum, Stability, Sentiment, and Quality ratings, click here.
Stock #1: IDT Corporation (IDT)
IDT provides communications and payment services internationally. It operates through Fintech, National Retail Solutions, net2phone, and Traditional Communications segments.
On June 4, 2024, IDT’s BOSS Money brand introduced domestic money transfers within the U.S., allowing users to send funds to recipients' U.S.-issued Visa or Mastercard-branded cards via its BOSS Money and BOSS Revolution apps, often crediting accounts within minutes.
Additionally, BOSS Money has expanded its service to include direct-to-card transfers for international destinations, enhancing accessibility and affordability for customers worldwide.
In terms of the trailing-12-month asset turnover ratio, IDT’s 2.32x is 362.9% higher than the 0.50x industry average. Its 6.88% trailing-12-month Return on Total Assets is 455.2% higher than the 1.24% industry average. In addition, the stock’s 2.97% trailing-12-month net income margin is 3.8% higher than the 2.86% industry average.
In the fiscal third quarter that ended March 31, 2024, IDT’s total revenues rose marginally over the prior-year quarter to $299.64 million, while its gross profit stood at $97.04 million, up 10.8% from the year-ago quarter.
For the same quarter, IDT’s income from operations grew 10.2% year-over-year to $11.43 million. Also, its net income attributable to IDT and EPS were $5.55 million and $0.22, respectively.
Over the past year, the stock has gained 50.6% to close the last trading session at $36.47.
It’s no surprise that IDT has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has a B grade for Value and Stability. It is ranked first in the Telecom – Domestic industry. Beyond what we stated above, we also have given IDT grades for Growth, Momentum, Sentiment, and Quality. Get all the IDT ratings here.
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VZ shares were trading at $41.44 per share on Friday afternoon, up $0.14 (+0.34%). Year-to-date, VZ has gained 15.44%, versus a 19.22% 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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