The telecom industry is undergoing a transformative phase with the adoption of 5G network and innovative capabilities of AI. Major companies are increasingly investing in infrastructure and planning for further technological advancements like 6G, resulting in substantial market growth avenues.
Amid this backdrop, investors could consider buying fundamentally sound communication stocks Verizon Communications Inc. (VZ), T-Mobile US, Inc. (TMUS), and AT&T Inc. (T) leading the 5G revolution.
The telecommunication industry is rapidly expanding with the widespread adoption of wireless networks and significant investments in infrastructure by major companies. Major leading telecom companies are attempting to accelerate the adoption of 5G technology and are already planning the deployment of next-generation 6G through strategic collaborations.
With this, the US telecom market is projected to reach $530.61 billion by 2029, exhibiting growth at a CAGR of 3.7%. Continued efforts to expand network capacity with fiber and wireless deployments to meet the growing demand for faster networks will navigate the US telecom industry in the near future.
Besides, AI capabilities like enhanced network security, data analysis in real-time, immediate detection, and automated responses to security incidents are creating significant opportunities for the telecommunication segment. Also, the 5G network is a significant driver for the growth of network optimization through AI.
With the vital role of AI in optimizing resource allocation, managing 5G network intricacies, and ensuring efficient data transmission, Global AI in the telecommunication market is set to revolutionize the current scenario. The segment is expected to reach $21.20 billion by 2030, registering a 40.4% CAGR.
Given these favorable market trends, let’s look at the fundamentals of the top three Telecom - Domestic stocks, 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 globally. The company operates in two segments, Verizon Consumer Group (Consumer); and Verizon Business Group (Business).
On September 13, VZ turned on new cell sites to bring fast and reliable 4G LTE and 5G Ultra Wideband service for the residents and visitors of Pooler, Port Wentworth, and Savannah. This step will result in improved connectivity for customers in the Savannah area.
On September 5, VZ and Frontier Communications Parent, Inc. entered into a definitive agreement under which Verizon will acquire Frontier in an all-cash transaction valued at $20 billion. The strategic acquisition will significantly expand V's fiber footprint, accelerating its delivery of premium mobility and broadband services to customers.
For the second quarter that ended on June 30, 2024, VZ’s total operating revenues increased marginally year-over-year to $32.80 billion. Its operating income grew 8.3% from the year-ago value to $7.82 billion. The company’s consolidated adjusted EBITDA came in at $12.30 billion, indicating increase of 2.8% year-over-year.
Analysts expect VZ’s revenue for the fourth quarter (ending December 2024) to increase 1.2% year-over-year to $35.54 billion. Its EPS for the same period is expected to grow 2.1% year-over-year to $1.10. Moreover, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of VZ have surged 12.7% over the past six months and 34.2% over the past year to close the last trading session at $45.
VZ’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Stability. Within the Telecom - Domestic industry, VZ is ranked #5 out of 18 stocks.
Click here to access additional ratings of VZ for Momentum, Value, Sentiment, Quality, and Growth.
Stock #2: T-Mobile US, Inc. (TMUS)
TMUS provides mobile communications services internationally. The company offers voice, messaging, and data services to customers in postpaid, prepaid, wholesale, and other services.
On August 6, TMUS introduced Partner Plus, a new channel subsidy program to make it more cost-effective and accessible for businesses to experience the benefits of 5G laptops and 5G business internet. The program is beneficial for channel partners, original equipment manufacturers, and the businesses they serve to make 5G more accessible.
During the second quarter, which ended on June 30, 2024, TMUS’ total revenues increased 3% year-over-year to $19.77 billion. Its adjusted EBITDA increased 8.8% from the year-ago value to $8.05 billion. The company’s net income and EPS amounted to $2.93 billion and $2.49, up 31.7% and 33.9% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted free cash flow grew 54.3% from the year-ago value to $4.44 billion.
As per the company’s full-year guidance, TMUS expects its adjusted free cash flow to range between $16.60 billion and $17 billion.
Street expects TMUS’ revenue and EPS for the third quarter (ending September 2024) to increase 4.3% and 23.4% year-over-year to $20.08 billion and $2.47, respectively. Also, the company has topped the consensus EPS estimate in three of the trailing four quarters.
Shares of TMUS have surged 27.7% over the past six months and 46.2% over the past year to close the last trading session at $205.85.
TMUS’ POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
TMUS has a B grade for Quality, Growth, Sentiment, and Stability. It is ranked #4 out of 18 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have TMUS ratings for Momentum and Value. Get all TMUS ratings here.
Stock #1: AT&T Inc. (T)
T provides telecommunications and technology services internationally. It operates through two segments, Communications; and Latin America. It offers wireless voice and data communications services, and sells handsets, wireless data cards, wireless computing devices, carrying cases/protective covers, and wireless chargers.
On September 11, T and Unsupervised signed a new agreement. The agreement is built upon a successful ongoing collaboration where Unsupervised's AI-powered Data Analyst software has identified over one hundred million dollars worth of opportunities having the potential to be deployed across business units at AT&T.
On August 12, T’s AT&T IoT connectivity and network API was incorporated into Oracle Corporation’s (ORCL) Enterprise Communications Platform. The integration marked a crucial step in bringing real-time communications to Oracle's suite of cloud applications and enabling its industry cloud application customers to connect and manage their IoT devices on the T’s network all in one platform.
For the second quarter that ended on June 30, 2024, T reported operating revenues of $29.80 billion. Its adjusted EBITDA increased 1.8% year-over-year to $11.34 billion. The company’s net income and EPS came in at $3.95 billion and $0.49 for the quarter, respectively. Also, its free cash flow increased 8.7% from the prior year’s quarter to $4.58 billion.
According to the company's full-year 2024 outlook, T expects wireless service revenue growth of 3% and broadband revenue growth of 7%+. It also expects adjusted EBITDA growth in the 3% range. The company's free cash flow is set in the range of $17 billion to $18 billion.
Street expects T’s revenue for the first quarter (ending March 2025) to increase 1.8% year-over-year to $30.57 billion, and its EPS for the same period is also expected to grow 1.8% year-over-year to $0.56. For the fiscal year 2025, the company’s revenue and EPS are expected to increase 1.7% and 3.3% year-over-year to $124.71 billion and $2.27.
T’s shares have gained 28.7% over the past six months and 47.6% over the past year to close the last trading session at $22.27.
T’s sound 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.
The stock has a B grade for Quality. Within the Telecom - Domestic industry, T is ranked #2 out of 18 stocks.
In addition to the POWR Ratings we’ve stated above, we also have T ratings for Growth, Stability, Value, Sentiment, and Momentum. Get all T ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TMUS shares were trading at $201.96 per share on Tuesday afternoon, down $3.89 (-1.89%). Year-to-date, TMUS has gained 27.36%, versus a 18.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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