The telecom market is in the midst of a significant change. 5G technologies, offering faster speed and enhanced connectivity, are the next big thing in the global telecom landscape, which has led to a surge in investments. Additionally, the telecom market faces tailwinds from companies increasingly adopting the Internet of Things (IoT) and cloud computing technology.
The rising demand for enhanced bandwidth connectivity drives the 5G infrastructure market’s growth. It is expected to expand at a CAGR of 34.2% from 2022 to 2030.
As companies rearrange their operations and recover from the pandemic impact, the global telecom market is expected to grow from $2.64 trillion in 2021 to $3.82 trillion in 2026, growing at a CAGR of 7.4%.
Given this backdrop, we think the telecom stocks Vodafone Group Public Limited Company (VOD), Lumen Technologies, Inc. (LUMN), and VEON Ltd. (VEON) might be solid buys right now.
Vodafone Group Public Limited Company (VOD)
VOD engages in telecommunication services internationally. The company offers mobile, fixed-line, and convergence services under the GigaKombi and Vodafone One names. The company is headquartered in Newbury, the United Kingdom.
On July 22, VOD announced that it had purchased 6.07 million of its ordinary shares from Goldman Sachs International as a part of its buy-back program. This program aims to reduce the issued share capital of VOD and offset the increase in the issued share capital partially.
VOD’s revenue increased 4% year-over-year to €45.58 billion ($46.55 billion) in the fiscal year that ended March 31. Its operating profit grew 11.1% from the year-ago value to €5.66 billion ($5.78 billion), while its profit for the financial year improved 389.6% year-over-year to €2.62 billion ($2.68 billion). The company’s adjusted EPS increased 36.5% from its year-ago value to 11.03c.
The consensus revenue estimate of $47.32 billion for the fiscal year ending March 2024 indicates a 1.3% year-over-year increase.
The stock has gained 3.3% year-to-date to close its last trading session at $15.42.
VOD’s POWR Ratings reflect this promising outlook. The company's overall A rating translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VOD is rated an A in Growth and a B in Value and Stability. Within the A-rated Telecom - Foreign industry, it is ranked #4 out of 46 stocks. Click here to see additional POWR Ratings for Momentum, Sentiment, and Quality for VOD.
Lumen Technologies, Inc. (LUMN)
LUMN is a facilities-based technology and communications company that offers various integrated products and services under the Lumen, Quantum Fiber, and CenturyLink brands internationally. The company operates in two broad segments Business and Mass Markets.
In July, LUMN announced an investment in its global Edge network and the expansion of its Edge Computing Solutions into Europe. This expansion is part of the company’s continued investment in next-generation solutions that are expected to meet the demands of today's global businesses.
LUMN’s net income came in at $599 million for the first quarter that ended March 31, representing a 26.1% year-over-year growth. Its operating income grew 9.7% from the prior-year quarter to $1.08 billion. The company’s EPS increased 34.1% from the prior-year period to $0.59
Analysts expect LUMN’s revenue for the quarter ended June 2022 to be $4.59 billion. The company’s EPS for the same quarter is expected to be $0.45.
LUMN has gained marginally intraday to close its last trading session at $10.55.
It is no surprise that LUMN has an overall B rating, which translates to Buy in our POWR Ratings system. The stock has an A grade for Value and a B for Quality. It is ranked #3 of 20 stocks in the Telecom - Domestic industry.
Beyond what we’ve stated above, we have also given LUMN grades for Growth, Momentum, Stability, and Sentiment. Get all the LUMN ratings here.
VEON Ltd. (VEON)
VEON is a mobile and fixed-line telecommunications services provider. The company provides voice, data, and other telecommunication services through a range of wireless, fixed, and broadband internet services. It is headquartered in Amsterdam, the Netherlands.
In June, VEON announced that its VEON Ventures division had completed an investment of $15 million as part of a Series A round for Dastgyr, a Pakistan-based B2B e-commerce marketplace platform. This investment will boost Pakistan’s e-commerce market and might benefit the company.
In the same month, the company announced the sale of its Georgian subsidiary VEON Georgia LLC, which is expected to simplify its structure.
VEON's total operating revenues for the first quarter ended March 31 amounted to $1.82 billion. The company's cash and cash equivalents balance, net of overdrafts, increased to 67.8% from the prior-year period to $1.98 billion.
Street EPS estimate for the fiscal year (ending December 2022) of $0.39 reflects a rise of 41.3% year-over-year. Likewise, Street revenue estimate for the same year of $8.86 billion indicates an improvement of 13.8% from the prior-year period.
Over the past five days, VEON’s stock has declined 1.8% to close its last trading session at $0.45.
This promising prospect is reflected in VEON’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
VEON has an A grade for Value and Quality. It is ranked #7 in the Telecom – Foreign industry. Click here to see the additional POWR Ratings for VEON (Growth, Momentum, Stability, and Sentiment).
VOD shares were trading at $15.54 per share on Monday afternoon, up $0.12 (+0.78%). Year-to-date, VOD has gained 7.07%, versus a -16.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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