The need for speed, whether wireline or wireless, continues to drive the direction of most of the top companies in the Robert Baird Communication Services and Technology coverage universe. The quality of network marketing and devices is determining the winners and losers, with video requirements and opportunities increasingly driving investment decisions. At the end of the day, who is best positioned to capitalize on the explosion in video, wireless and wireline?
In a new research report the analysts at Baird drill down in the broadband arena and come up with one very solid conclusion. Demand for broadband across the board is increasing due to surging video usage. That demand is not expected to slow down anytime soon. Here are the top stocks to buy that are leading the charge in supplying the insatiable consumer demand for broadband.
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AT&T Inc. (NYSE:T) continues to aggressively market its U-verse video platform. It also has announced an ultra-fast Internet service that will compete with Google Inc.'s (GOOG) new Google Fiber offering. AT&T added 655,000 new subscribers this past quarter. Shareholders are paid an outstanding 5.1% dividend. The Thomson/First Call price target for the stock is posted at $38, and AT&T closed Tuesday at $35.17.
Verizon Communications Inc. (VZ) added 173,000 FIOS video subscribers in the most recent quarter. Many came at the expense of the cable companies. Investors are paid a solid 4.2% dividend. The company is a top stock to buy at Baird, which has put a $54 price target on the stock. The consensus estimate for the stock is also $54. Verizon closed Tuesday at $50.16.
Comcast Corp. (CMCSA) is the largest cable provider in the United States and continues to grow its market share. The company added 297,000 new broadband subscribers in the third quarter. Investors are paid a 1.6% dividend. The Baird price target for Comcast is $55, while the consensus target is posted at $54. Comcast closed Tuesday at $46.98.
Time Warner Cable Inc. (TWC) has made tactical mistakes over the past several quarters, experimenting with various pricing and promotional efforts. The firm now seems to be moving in the right direction, emphasizing revenue per customer over raw customer growth. Investors are paid a 2.1% dividend. The consensus price target for the stock is $130. The stock closed Tuesday at $118.38.
Charter Communications Inc. (CHTR) may have an extremely bright future as the company pursues an acquisition of Time Warner Cable. In the company's third quarter, Charter posted a more than 5% gain in top-line sales to $2.1 billion. Growth came in the form of improvements across not only Internet and commercial revenue, but video as well. The consensus price target for Charter is set at $140, and the stock closed Tuesday at $128.46.
In their report, the analysts at Baird were also very bullish on Apple Inc. (AAPL), with a price target of $620, and Netflix Inc. (NFLX), with a price target of $420. They see these two top companies as direct beneficiaries of the increase in broadband availability and speed. With products and entertainment that benefit from broadband enhancement, they expect both to outdistance competitors in the future.
Old dial-up and DSL Internet speeds now seem almost archaic to most consumers. The explosion in everything from online streaming of videos and movies to online gaming involving multiple players continues to create a huge demand for broadband capacity and speed. Investors that buy the stocks of companies that are satisfying the demand may be well rewarded now and in the future.