3 Telecom Stocks You Should Not Miss Adding to 2024 Portfolio
The fifth generation of cellular technology, or 5G, has accentuated the need for high-speed, high-bandwidth and low-latency connections for digital sustainability. 5G has fast-tracked the wide proliferation of video and other bandwidth-intensive applications with a data transmission rate that is about 10-100 times faster than the erstwhile 4G networks.
Billed as the technology of the future with faster download speed and low latency, 5G is touted as the primary catalyst for next-generation IoT services. These include connected cars, augmented reality, virtual reality platforms, smart cities and connected devices that are likely to revolutionize key industry verticals.
The telecom sector has witnessed healthy demand trends in 2023 with an accelerated pace of 5G deployment and increased fiber densification. Despite a challenging macroeconomic environment owing to geopolitical conflicts, inflationary pressure and uncertain business conditions, the industry seems to have benefited from higher demand for scalable infrastructure for seamless connectivity amid a wide proliferation of IoT devices.
Steady investments by leading carriers to upgrade their network infrastructure and increase their fiber footprint to meet the growing demand for flexible data, video, voice and IP solutions also seem to have buoyed the sector.
As the 5G ecosystem evolves with increased deployment across the globe, it is likely to offer a plethora of opportunities for diverse industries to spearhead innovation and redefine our daily lives. Riding on such growth drivers, various telecommunication firms are poised to benefit in 2024 and beyond. Below is a list of three such stocks in random order.
United States Cellular Corporation USM: Headquartered in Chicago, IL, U.S. Cellular is the fourth largest full-service wireless carrier in the United States. The company has taken concrete steps to accelerate subscriber additions and improve churn management. It aims to offer the best wireless experience to customers by providing superior quality network connectivity and national coverage.
U.S. Cellular is focused on improving cost and profitability by managing data delivery costs and has introduced equipment installment plans. The carrier aims to provide excellent customer service while ramping up business opportunities that use 5G and IoT. U.S. Cellular’s top line is benefiting from solid user engagement in its fixed wireless business and improvement in tower rental revenues. Management's efforts to enhance operational efficiency and drive cost optimization across its operations have significantly boosted profitability despite a very challenging competitive environment.
The stock has gained 92.4% over the past year. It has an average brokerage recommendation (ABR) of 2.5 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock. Earnings estimates for U.S. Cellular for the current year have moved up 125% since December 2022. It has a VGM Score of B and delivered an earnings surprise of 63.4%, on average, in the trailing four quarters. U.S. Cellular sports a Zacks Rank #1 (Strong Buy) currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks, Inc. ANET: Santa Clara, CA-based Arista is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. It is increasingly gaining market traction in 200- and 400-gig high-performance switching products. It remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Arista has a software-driven, data-centric approach to help customers build cloud architecture and enhance their cloud experience. It is witnessing solid demand trends among enterprise customers backed by its multi-domain modern software approach, which is built upon its unique and differentiating foundation, the single EOS (Extensible Operating System) and CloudVision stack. The versatility of Arista’s unified software stack across various use cases, including WAN routing and campus and data center infrastructure, sets it apart from its competitors.
With an ABR of 1.67, the stock has gained 98.9% over the past year. Earnings estimates for Arista for the current year have moved up 26.2% since December 2022. It has long-term earnings growth expectations of 19.8% and delivered an earnings surprise of 12%, on average, in the trailing four quarters. Arista carries a Zacks Rank #2 (Buy).
InterDigital, Inc. IDCC: Headquartered in Wilmington, DE, InterDigital is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.
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A well-established global footprint, diversified product portfolio and ability to penetrate different markets are key growth drivers for the company. Apart from a strong portfolio of wireless technology solutions, the addition of technologies related to sensors, user interface and video to its offerings is likely to drive considerable value, given the massive size of the market it offers licensing technologies to.
With an ABR of 1, the stock has gained 122.3% over the past year. Earnings estimates for InterDigital for the current year have moved up 238.8% since December 2022. This Zacks Rank #1 stock has long-term earnings growth expectations of 17.4% and delivered an earnings surprise of 170.7%, on average, in the trailing four quarters.
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United States Cellular Corporation (USM) : Free Stock Analysis Report
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