The telecom sector has been holding up relatively well despite macroeconomic challenges, thanks to robust customer demand. In the face of ongoing innovation and expanding usage of cutting-edge technologies, investors could consider buying shares of leading telecom player Verizon Communications Inc. (VZ).
However, considering the lingering macroeconomic headwinds, I think it is best to steer clear of fundamentally weak FingerMotion, Inc. (FNGR) now.
Rising spending on the deployment of 5G infrastructures, an increasing number of mobile subscribers, and soaring demand for high-speed data connectivity amid the growing adoption of next-generation technologies are the potential factors fueling the telecom market growth. The global telecom services market is expected to expand at a CAGR of 6.2% until 2030.
The telecommunication market is transforming continuously with the integration of emerging technologies. AI in telecommunication market is growing due to the demand for autonomously driven network solutions. The market for artificial intelligence in telecommunications is expected to grow at a 43.1% CAGR until 2030.
However, the industry continues to face government regulations, soaring inflation, and consecutive rate hikes.
So, lets discuss VZ and FNGR in detail:
Stock to Buy:
Verizon Communications Inc. (VZ)
VZ and its subsidiaries offer communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. Its segments are Consumer and Business.
On March 2, 2023, VZ revealed an API proof of concept for Edge Discovery & Quality of Service (QoS) with Amazon Web Services, Inc. (AWS) that allows users to combine Dynamic Quality of Service (QoS) from VZ with AWS edge services. Customers should be able to deploy low latency, high bandwidth applications across a variety of emerging use cases as a result of this combination.
On February 12, 2023, VZ announced that its newest data plan, 50 Mbps Verizon Fios service, will be available in Boston to assist small business owners in the Boston area in gaining high-speed internet access. This should enhance the company’s income streams.
In terms of forward EV/EBITDA, VZ is currently trading at 6.98x, 17.1% lower than the industry average of 8.41x. Its forward Price/Book of 1.51x is 15.2% lower than the industry average of 1.78x.
VZ’s trailing-12-month gross profit margin of 56.79% is 14.4% higher than the 49.63% industry average. Its trailing-12-month net income margin of 15.53% is 428.1% higher than the 2.94% industry average.
VZ’s operating revenues came in at $35.25 billion for the fourth quarter that ended December 31, 2022, up 3.5% year-over-year. Moreover, its wireless equipment revenues increased 4.1% year-over-year to $7.63 billion. Also, its net income increased 41.4% year-over-year to $6.70 billion. VZ’s EPS came in at $1.56, reflecting an increase of 40.5% from the prior-year quarter.
VZ’s revenue is expected to increase marginally year-over-year to $139.12 billion in 2024. Its EPS is expected to increase marginally year-over-year to $4.74 in 2024. VZ’s shares have lost 2.6% intraday to close the last trading session at $36.55.
VZ’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VZ has a B grade for Value and Stability. In the Telecom – Domestic industry, it is ranked #4 out of 19 stocks. For the additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for VZ, click here.
Stock to Avoid:
FingerMotion, Inc. (FNGR)
FNGR, a mobile data specialist company, provides mobile payment and recharge platform solutions. The company offers telecommunication providers’ products and services, including data plans, subscription plans, mobile phones, and loyalty points redemption services.
In terms of trailing-12-month Price/Sales, FNGR is currently trading at 1.84x, 43.3% higher than the industry average of 1.28x. Its trailing-12-month Price/Book of 4.37x is 153.2% higher than the industry average of 1.73x.
FNGR’s trailing-12-month gross profit margin of 8.12% is 83.6% lower than the industry average of 49.63%. Its trailing-12-month ROCE of negative 78.95% compares to the industry average of 3.57%.
FNGR’s net loss from operations increased 74.9% year-over-year for the fiscal third quarter ended November 30, 2022, to $1.86 million. Its net loss increased 143.3% year-over-year to $2.52 million. Moreover, its net loss per share came in at $0.06, up 200% year-over-year.
The stock has lost 70.1% over the past three months to close the last trading session at $1.15.
FNGR’s bleak outlook is reflected in its POWR Ratings. The company has an overall D rating, which equates to a Sell. It is ranked #15 in the same industry.
In addition, it has an F grade for Quality and a D for Stability. Click here to access the additional ratings of FNGR (Value, Momentum, Growth, and Sentiment).
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VZ shares were trading at $36.47 per share on Friday afternoon, down $0.08 (-0.22%). Year-to-date, VZ has declined -5.98%, versus a 0.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...
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