Analyzing the Buy Potential of 3 Telecom Stocks

NASDAQ: TMUS | T-Mobile US Inc. News, Ratings, and Charts

TMUS – The telecom industry is predicted to expand due to rising demand for high-speed internet and rapid 5G deployment. Given its solid growth prospects, let’s analyze the prospects of telecom stocks: T-Mobile US (TMUS), SPOK Holdings (SPOK), and Verizon Communications (VZ). Read on….

The telecom industry is expected to grow as a result of the increasing reliance on digital communication and the need for faster and more reliable connectivity. Also, the rise of new technologies, such as the Internet of Things (IoT) and Artificial Intelligence (AI), are boosting the demand for enhanced telecom infrastructure.

Therefore, telecom stocks T-Mobile US, Inc. (TMUS), SPOK Holdings, Inc. (SPOK), and Verizon Communications Inc. (VZ) could be worthy additions to your watchlist.

Online communication is gaining prominence across various sectors like education, healthcare, and IT. The increasing need for high-speed connectivity to support data transfer and various public and personal tasks is fueling demand in the telecommunications market.

The global telecom services market, valued at $1.81 trillion in 2022, is expected to grow at a CAGR of 6.2% from 2023 to 2030.

In addition, due to the widespread availability of 5G compatible devices and significant government investment to foster the growth of the 5G ecosystem, the telecom market is looking ahead to significant growth from this avenue. The global 5G services market is expected to grow at a CAGR of 25.3% to reach $331.10 billion by 2027.

Furthermore, the growing adoption of 5G networks in mobile networks and demand for efficient network management solutions have led to network operators turning toward Artificial Intelligence (AI) to expedite operations. The global AI in telecommunications market is expected to be valued at $14.50 billion by 2033, expanding at a significant CAGR of 28.5%.

With these favorable trends in mind, let’s delve into the fundamentals of the three Telecom – Domestic stocks, beginning with number 3.

Stock #3: T-Mobile US, Inc. (TMUS)

TMUS, together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. The company is a provider of voice, messaging, and data services to customers in the postpaid, prepaid, and wholesale and other services.

On October 31, TMUS announced a significant expansion in its 5G network coverage in Utah, covering nearly 99% of the state’s population after adding new cell towers and upgrading existing ones. This enhancement is expected to solidify TMUS’ business by attracting more customers and retaining existing ones.

TMUS’ total revenue for the third quarter of 2023 amounted to $19.25 billion. Its operating income increased 180.7% year-over-year to $3.60 billion. Also, its net income came in at $2.14 billion, registering an increment of 321.7% from the prior-year quarter, and its earnings per share came in at $1.82, registering an increment of 355% year-over-year.

The consensus revenue estimate of $19.96 billion for the fiscal quarter ending March 2024 represents a 1.7% increase year-over-year. Its EPS is expected to grow 36.7% year-over-year to $2.40 for the same period. It surpassed EPS estimates in all four trailing quarters.

TMUS’ shares have gained 9.5% over the past three months and 5.2% year-to-date to close the last trading session at $147.34.

TMUS’ strong fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth and Stability. Within the 18-stock Telecom – Domestic industry, it is ranked #5. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Click here to see additional ratings of TMUS for Value, Momentum, Sentiment, and Quality.

Stock #2: SPOK Holdings, Inc. (SPOK)

Healthcare communications establishment SPOK offers unified clinical communication and collaboration solutions comprising call center operations, clinical alerting and notifications, and mobile communications to care teams.

On October 25, SPOK declared a regular quarterly dividend of $0.3125 per share, payable to shareholders on December 8, 2023. Its annual dividend of $1.25 yields 7.99% on prevailing prices.

For the fiscal third quarter that ended September 30, 2023, SPOK’s total revenue increased 5% year-over-year to $35.43 million. Its net income increased 52.4% from the same period last year to $4.45 million.

Its adjusted EBITDA came in at $8.42 million, showing an increment of 24.8% from the prior-year quarter, while the net income per common share came in at $0.22, registering an increment of 46.7% year-over-year.

Analysts expect SPOK’s EPS for the next fiscal year (ending December 2024) to grow 10.5% from the prior year to $0.74. The company’s revenue for the same year is expected to increase 1.5% year-over-year to $139.76 million. The company topped EPS and revenue estimates in each of the trailing four quarters.

The stock has gained 77.5% over the past year and 21.3% over the past six months to close the last trading session at $15.64.

SPOK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It is ranked #3 in the same industry. It has an A grade for Quality.

To see additional SPOK ratings for Growth, Value, Momentum, Stability, and Sentiment, click here.

Stock #1: Verizon Communications Inc. (VZ)

VZ offers communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. It operates through two segments: Consumer and Business.

On October 30, VZ and Omaha Productions announced their partnership to create innovative 5G entertainment content with the launch of the immersive football trivia game experience “Game Winning Drive” hosted by Peyton Manning.

This partnership aims to engage customers and fans while showcasing VZ’s network capabilities, potentially enhancing VZ’s brand and customer loyalty in the competitive telecommunications market.

On the same day, VZ renewed its partnership with the Baltimore Ravens, solidifying its role as the “Official 5G Network of the Baltimore Ravens” to enhance connectivity and fan engagement at M&T Bank Stadium.

The partnership underscores VZ’s commitment to delivering connectivity solutions and engaging with fans, potentially strengthening its brand and customer loyalty.

VZ’s total operating revenues amounted to $33.34 billion for the third quarter that ended September 30, 2023. Additionally, for the nine months ended September 30, its cash, cash equivalents, and restricted cash balance increased 57.8% from the previous year’s value to $5.66 billion, while its net cash provided by operating activities increased 2.1% year-over-year to $28.80 billion.

Analysts expect VZ’s revenue to increase 1.6% year-over-year to $135.57 billion for the year ending December 2024. The company topped the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 9.3% over the past three months and 15.5% over the past month to close the last trading session at $35.64.

VZ’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.

VZ has a B grade for Stability and Quality. It is ranked #2 in the same industry.

Beyond what is stated above, we’ve also rated VZ for Growth, Value, Momentum, and Sentiment. Get all VZ 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.

2024 Stock Market Outlook >

TMUS shares were trading at $147.45 per share on Tuesday afternoon, up $0.11 (+0.07%). Year-to-date, TMUS has gained 5.32%, versus a 15.53% 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. More...

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