ESNT vs. TREE: Which Stock Should Value Investors Buy Now?
In the last five trading days, telecom stocks declined initially but later witnessed a steep rise as U.S.-China trade concerns abated with both parties signaling to put their differences on hold and continue negotiations to bridge the huge trade imbalance.
Last week, President Trump revealed that the U.S. administration is mulling a settlement of the trade embargo on ZTE as part of the ongoing trade talks between the two warring countries. This includes a fine of $1.3 billion against ZTE, restructuring of its management and imposition of strict security measures to prevent the theft of U.S. intellectual and national security secrets.
In return, China has vouched to reduce tariffs on U.S. agricultural and farm products and has announced to cut tariffs on most imported cars from 25% to 15% from Jul 1. However, various U.S. lawmakers have voiced their concerns and raised their opposition to allow ZTE a re-entry into the market, citing cyber threat.
With heightened concerns for cyber security taking center stage, the U.S. Department of Homeland Security released a new cyber security strategy that hinges on five pillars – focusing on identifying risks, reducing vulnerability, reducing threats, mitigating consequence and enabling cyber security outcomes. The new framework would help to mitigate risks and strengthen collective defense mechanism to thwart potential cyber threats.
Regarding company-specific news, improved product launches for superior connectivity and high-quality content to subscribers at lower cost of ownership and, technology collaborations ruled the roost over the last five trading days.
Recap of the Week’s Most Important Stories
1. Ericsson ERIC collaborated with Japan’s mobile operator company, SoftBank Corp. to improve radio access network design in the Tokai region. Implementing this service in dense urban clusters with multi-band complexity in the Tokai region cut lead time by 40% compared with traditional network design methods.
With network operators moving to 5G, radio network design will become more complex, driven by significant increase in cell traffic and site density. This is where machine learning and Big Data analytics-based automation services, which Ericsson specializes in, come in handy. (Read more: Ericsson Partners SoftBank to Boost Network Design in Tokai)
2. AT&T Inc. T extended its global agreement with Aira, an assistive community, enabling instant access to visual information for anyone, anytime and anywhere.
The AT&T global network connects Aira's smart glasses, worn by visually impaired people to trained and professional agents. The agents use a built-for-purpose dashboard that provides details of users along with a secure, near real-time stream of video.
The combination of Aira's groundbreaking assistive technology and AT&T’s highly secure global wireless connectivity is aimed at helping users to see the world around them. (Read more: AT&T Inks Deals With Aira and RED, to Expand Footprint)
3. Viasat, Inc. VSAT and Honeywell International Inc. announced an extended partnership. As part of GoDirect Cabin Connectivity suite of services, Honeywell will offer Viasat's high-speed Ka-band in-flight Internet service to large and mid-cabin business jet customers. This will bring new Internet service quality to the business aviation market.
The company’s business aviation in-flight Internet service is likely to tap into the industry's highest-capacity, most reliable Ka-band satellite communications network. Also, it will use Viasat's business-class shipset — the Global Aero Terminal 5510. (Read more: Viasat Partners With Honeywell for In-Flight Connectivity)
4. In a concerted move to digitize its supply chain operations and reduce costs, Sprint Corporation S collaborated with Scopeworker, a firm that specializes in supply chain management. The digital transformation will likely help the communication services provider to effectively compete with rivals as it prepares itself for the launch of 5G services in the first half of 2019.
Sprint will leverage Scopeworker’s namesake software — an Industry 4.0 Digitized Supply Chain Vendor Management System (DSC VMS) — to digitize its multi-billion-dollar supply chain. The company performed various trials to study the efficacy of the program and remains convinced of its success as the trials consistently recorded double-digit savings for its procurement department.
Sprint aims to replicate this success to automate cost, time and quality efficiencies across the board to improve its network coverage, reliability and speed. (Read more: Sprint Partners With Scopeworker to Digitize Supply Chain)
5. Qualcomm Inc. QCOM introduced the industry’s first 5G NR solution for small cells and remote radio head deployments via its subsidiary, Qualcomm Technologies, Inc.
The 5G NR solution is highly flexible and is designed to enable original equipment manufacturers to reuse both software and hardware designs across sub-6 GHz and millimeter wave products. This will enable operators to easily switch between low and high frequency spectrum bands. The solution is built on FSM100xx platform, which has a software-defined modem, enabling operators to upgrade it with 5G evolution. (Read more: Qualcomm Unveils the First 5G NR Solution for Small Cells)
The following table shows the price movement of some of the major telecom stocks over the past week and during the last six months.
In the last five trading days, Qualcomm was the major gainer with its share price up 3.6%. AT&T, SBA Communications Corp. SBAC and Harris Corp. HRS declined, with each stock losing 0.1%.
Over the last six months, Motorola Solutions, Inc. MSI was the best performer with its stock appreciating 16.2% while Sprint declined the most with shares falling 19.6%.
Over the last six months, the Zacks Telecommunications Services industry has underperformed the benchmark S&P 500 index with a decline of 6% against a gain of 4.7% for the latter.
What’s Next in the Telecom Space?
In addition to continued product launches and deployment of 5G technologies, all eyes will remain glued to the latest developments on how the U.S. administration addresses the key concerns following the proposed settlement of the ZTE issue.
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Ericsson (ERIC) : Free Stock Analysis Report
SBA Communications Corporation (SBAC) : Free Stock Analysis Report
Harris Corporation (HRS) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
Viasat Inc. (VSAT) : Free Stock Analysis Report
AT&T Inc. (T) : Free Stock Analysis Report
Sprint Corporation (S) : Free Stock Analysis Report
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