The demand for high-speed data connectivity is accelerating the growth of the telecom industry. The global telecom market is expected to grow at a CAGR of 6% until 2026.
Moreover, the rising demand for enhanced bandwidth connectivity with low latency for many mission-critical applications is estimated to power the 5G infrastructure industry growth. The 5G infrastructure market is anticipated to grow at a CAGR of 34.2% until 2030.
Moreover, the Bipartisan Infrastructure Law includes a historic $65 billion investment to expand affordable and reliable high-speed Internet access in communities across the U.S. Government initiatives as such to address digital equity should boost the telecom industry in coming years.
Furthermore, amid the favorable industry trends, investors’ interest in telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 5.8% gains over the past month.
Given the growth prospects of the industry, telecom stocks Verizon Communications Inc. (VZ), AT&T Inc. (T), Ooma, Inc. (OOMA), and Spok Holdings, Inc. (SPOK) might be ideal buys right now. These stocks are currently trading at attractive valuations.
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 January 12, 2023, VZ announced the launch of Verizon Mobile for Microsoft Teams, a new service that integrates mobile devices with Microsoft Teams for easier calling and collaboration, as part of its strategic relationship with Microsoft Corporation (MSFT). This collaboration with the tech giant should be beneficial.
On December 1, VZ announced a quarterly dividend of $0.65 per share, payable on February 1, 2023. It pays $2.61 annually as dividends which translates to a yield of 6.46% at the current price, compared to the 4-year average dividend yield of 4.70%.
Its dividend payments have grown at a CAGR of 2% over the past three years. It has paid dividends for 22 consecutive years.
In terms of its forward non-GAAP P/E, VZ is trading at 8.19x, which is 52.5% lower than the industry average of 17.24x. Its forward EV/EBIT multiple of 11.15 is 27.8% lower than the industry average of 15.43.
VZ’s total operating revenues came in at $35.25 billion for the fourth quarter that ended December 31, 2022, up 3.5% year-over-year. Net income rose 41.4% year-over-year to $6.70 billion, while net income attributable to VZ grew 40.5% year-over-year.
Analysts expect VZ’s revenue for the fiscal first quarter ending March 2023 to be $33.95 billion, indicating a 1.2% year-over-year growth. Its EPS is likely to be $1.19 in the same quarter. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 12.4% over the past three months to close the last trading session at $40.42.
VZ’s POWR Ratings reflect its promising outlook. 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, with each factor weighted to an optimal degree.
VZ also has a B grade for Stability. It is ranked #5 of 19 stocks in the Telecom – Domestic industry.
To access additional ratings for Sentiment, Quality, Growth, Value, and Momentum, click here.
AT&T Inc. (T)
T provides telecommunications, media, and technology services worldwide. It operates in two segments, Communications; and Latin America.
On December 23, 2022, T and BlackRock Alternatives, through a fund managed by its Diversified Infrastructure business, announced a definitive agreement to form a joint venture to operate a commercial fiber platform.
The joint venture called Gigapower, LLC will provide a fiber network to internet service providers and other businesses across the U.S. and should amplify the revenues of the company.
T has paid dividends for 38 consecutive years. While T’s four-year average dividend yield is 8.79%, its current dividend translates to a 5.84% yield.
Its forward Price/Book multiple of 1.11 is 46.5% lower than the industry average of 2.07. In terms of its forward non-GAAP P/E, T is currently trading at 7.37x, which is 57.2% lower than the industry average of 17.24x.
T’s total operating revenue revenues came in at $31.34 billion for the fourth quarter that ended December 31, 2022, up marginally year-over-year. Its adjusted EBITDA rose 7.9% year-over-year to $10.23 billion. Also, its free cash flow increased 14.7% year-over-year to $6.10 billion.
Street expects T’s revenue and EPS to come in at $30.15 billion and $0.63 in the current fiscal first quarter ending March 2023. Additionally, it has topped consensus EPS estimates in each of the trailing four quarters.
Shares of T have gained 27.6% over the past year to close the last trading session at $19.16.
T’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Value, Quality, and Sentiment. Within the same industry, it is ranked #4.
Beyond what is stated above, we’ve also rated T for Stability, Growth, and Momentum. Get all T ratings here.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies to businesses and residential customers in the United States and Canada. The company’s offerings include Ooma Business, Ooma Office, Ooma Enterprise, and Ooma AirDial. It offers its products through direct sales, distributors, retailers, and resellers, as well as online.
Its forward EV/Sales multiple of 1.57 is 22.1% lower than the industry average of 2.02.
During the fiscal third quarter that ended October 31, 2022, OOMA’s total revenues increased 15.3% year-over-year to $56.68 million, while its adjusted EBITDA increased 11.7% year-over-year to $4.50 million. The company’s non-GAAP net income increased 4.7% year-over-year to $3.50 million, while its non-GAAP quarterly EPS increased 7.7% year-over-year to $0.14.
The EPS estimate for the fiscal fourth quarter (ending January 2023) of $0.14 reflects a rise of 10.25% year-over-year. Likewise, its revenue estimate for the same quarter of $56.40 million indicates an improvement of 11.7% from the prior-year quarter. Additionally, OOMA has topped consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 21.2% over the past six months to close the last trading session at $14.13.
OOMA’s robust prospect is reflected in its POWR Ratings. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
OOMA has an A grade for Growth and B grade in Value, Stability, and Sentiment. It is ranked first in the same industry.
Click here to see the additional POWR Ratings for OOMA (Quality and Momentum).
Spok Holdings, Inc. (SPOK)
SPOK provides healthcare communication solutions worldwide. It delivers clinical information to care teams to enhance patient outcomes. The company offers subscriptions to one-way or two-way messaging services and ancillary services and sells devices to resellers.
In terms of forward EV/Sales, SPOK is currently trading at 1.09x, which is 46.2% lower than the industry average of 2.02x. Its trailing-12-month Price/Book multiple of 1.07 is 42.6% lower than the industry average of 1.87.
SPOK’s operating income came in at $3.54 million for the third quarter that ended September 30, 2022, compared to a loss of $3.56 million in the year-ago period. Its net profit came in at $2.92 million compared to a net loss of $2.49 million in the same period the prior year. Also, its EPS came in at $0.15 compared to a loss per share of $0.13 in the previous-year quarter.
Its EPS is likely to rise 95.6% year-over-year in the fiscal year that ended in December 2022. Its revenue is expected to be $133.76 million in the same period.
The stock has gained 28.5% over the past six months, closing the last trading session at $8.35.
It is no surprise that SPOK has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth and Sentiment and B grade for Quality and Value. SPOK is ranked #2 in the same industry.
In addition to the POWR Ratings mentioned above, we have also rated SPOK for Momentum and Stability. Get all SPOK ratings here.
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VZ shares were trading at $40.34 per share on Wednesday morning, down $0.08 (-0.20%). Year-to-date, VZ has gained 3.99%, versus a 3.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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