The communication industry is flourishing as it remains essential, harnessing artificial intelligence (AI) to revolutionize operations and customer experiences while defending core businesses to cut costs through advanced next-gen networks.
Given these trends, investors could scoop up shares of fundamentally stable communication stocks Verizon Communications Inc. (VZ), T-Mobile US, Inc. (TMUS) and AT&T Inc. (T), all of which exhibit strong growth potential.
The telecommunications industry is experiencing remarkable growth, driven by widespread wireless network adoption and substantial investments in infrastructure.
The expansion of 5G technology and the anticipation of 6G innovations are elevating communication capabilities, particularly benefiting the United States as a leader in digital advancements. This progress is poised to foster significant business and service growth.
Moreover, AI is transforming the telecommunications sector by enhancing operational efficiency and customer experiences and managing data center demands.
This integration of AI presents a lucrative investment opportunity, with the global AI in telecommunications market projected to reach $21.20 billion by 2030, growing at a CAGR of 40.4%.
In the United States, the telecom industry is also adapting to the cloud technology shift, which is fueling online migration and broadening market opportunities.
According to a report by Mordor Intelligence, the U.S. telecom market is forecasted to grow to $530.61 billion by 2029, reflecting a steady CAGR of 3.7%. This growth underscores the ongoing transformation and expansion of the industry.
Considering these trends, let us discuss the fundamentals of three top-rated Telecom – Domestic stocks, starting with #3.
Stock #3: Verizon Communications Inc. (VZ)
VZ delivers a wide range of communication, technology, information, and entertainment solutions to consumers, businesses, and government organizations around the globe. It operates in two segments: Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
On August 13, VZ announced its partnership with State Farm Arena and the Atlanta Hawks. VZ aims to market its products and services to Hawks fans and to enrich the fan experience at State Farm Arena by making use of its advanced network capabilities to enhance connectivity during games and events.
The company could benefit significantly from this partnership in terms of gaining mass popularity in the state and enhancing its growth even further.
On August 12, VZ announced its new Enterprise Infrastructure Solutions (EIS) contract with the National Labor Relations Board (NLRB), an independent federal agency, for a work order of $4 million to re-configure and upgrade NLRB’s Software-Defined Wide Area Network (SD-WAN) at all 48 branch offices.
Such government contracts could enhance VZ’s foothold in the public sector, potentially securing future income streams and boosting the company’s reputation.
For the fiscal 2024 second quarter that ended June 30, 2024, VZ’s total operating revenues increased marginally year-over-year to $32.80 billion. Its operating income came in at $7.82 billion, increasing 8.3% from the previous year’s quarter. The company’s consolidated adjusted EBITDA increased 2.8% year-over-year to $12.30 billion.
As of June 30, 2024, VZ’s cash and cash equivalents stood at $2.43 billion compared to $2.07 billion on December 31. 2023.
For the fiscal fourth quarter ending December 2024, VZ’s revenue is expected to increase 1.2% year-over-year to $35.54 billion. Its EPS for the next quarter is expected to be $1.10, increasing 2% year-over-year.
Shares of VZ have surged 10.8% over the past nine months and 24.3% over the past year to close the last trading session at $41.45.
VZ’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
VZ has a B grade for Stability. It is ranked #6 out of 18 stocks in the Telecom – Domestic industry.
In addition to the POWR Ratings we’ve stated above, we also have VZ ratings for Momentum, Sentiment, Value, Quality, and Growth. Get all VZ ratings here.
Stock #2: T-Mobile US, Inc. (TMUS)
TMUS provides mobile communication services, including voice, messaging, and data, through its T-Mobile and Metro by T-Mobile brands. It utilizes its 4G LTE and 5G networks to deliver these services. Additionally, the company offers a variety of wireless devices and accessories, along with financing options via equipment installment plans (EIP).
On August 6, TMUS launched its Partner Plus channel subsidy program, aimed at making 5G laptops and 5G Business Internet more accessible and affordable for businesses. By reducing the cost barrier to 5G technology, TMUS seeks to highlight its superior performance and security benefits, positioning itself for substantial growth and heightened market appeal.
On July 24, TMUS announced its agreement to establish a joint venture with KKR & Co. Inc. (KKR), a leading global investment firm that will acquire Metronet, a fast-growing pure play fiber company, including its broadband infrastructure, rapidly growing residential fiber business operations and existing customers.
The deal also includes acquiring Oak Hill Capital’s stake. This venture would enable TMUS to tap into Metronet's established customer base, boost income streams, and fortify its market position in residential fiber services.
In the fiscal 2024 second quarter that ended June 30, 2024, TMUS’ total services revenues rose 4.4% year-over-year to $16.43 billion. Its adjusted EBITDA stood at $8.05 billion, up 8.8% from the year-ago quarter. Plus, the company’s net income and EPS increased 31.7% and 33.9% from the prior year’s period to $2.93 billion and $2.49, respectively.
Street expects TMUS’ revenue and EPS for the fiscal third quarter ending September 2024 to increase 4.3% and 23.6% year-over-year to $20.08 billion and $2.47, respectively. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
TMUS’ stock has gained 22.9% over the past three months and 53% over the past year to close the last trading session at $204.03.
It’s no surprise that TMUS has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
TMUS has a B grade for Growth, Stability, Sentiment, and Quality. It is ranked #4 in the 18-stock Telecom – Domestic industry.
Beyond what we stated above, we also have given TMUS grades for Value and Momentum. Get all the TMUS ratings here.
Stock #1: AT&T Inc. (T)
T offers telecommunications and technology services, operating through two distinct segments. The Communications segment delivers a range of wireless, wireline, and broadband services. Meanwhile, the Latin America segment focuses on providing wireless services and equipment, specifically targeting the Mexican market.
On August 12, Oracle Corporation (ORCL) announced the integration of AT&T IoT connectivity and network API into its Enterprise Communications Platform (ECP). The partnership enhances T's position in the IoT and cloud application sectors, providing customers with a more seamless experience and bolstering its market presence.
On May 15, T announced its agreement with AST SpaceMobile, Inc. (ASTS), a pioneer in building a global cellular broadband network in space, to launch their first space-based broadband network directly to everyday cell phones. The initiative marks a significant stride towards enhancing connectivity nationwide, bolstering T's popularity and fostering further growth.
For the fiscal 2024 second quarter that ended June 30, 2024, T’s adjusted EBITDA came in at $11.34 billion, increasing 2.6% year-over-year. Also, the company’s free cash flow for the quarter increased 8.7% from the year-ago value to $4.58 billion. In addition, net income attributable to common stock came in at $3.55 billion or $0.49 per share.
The projected consensus for revenue and EPS stands at $124.71 billion and $2.26, respectively, marking a modest year-over-year increase of 1.6% in revenue and 3.3% in EPS for the fiscal year ending December 2025.
T’s stock has gained 18.4% over the past six months and 39.3% over the past year to close the last trading session at $19.65.
T’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
T has a B grade for Value and Quality. It is ranked #2 among 18 stocks within the same industry.
Click here to access T’s ratings for Growth, Stability, Momentum, and Sentiment.
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TMUS shares were unchanged in after-hours trading Tuesday. Year-to-date, TMUS has gained 28.25%, versus a 18.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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