Kalkine Media lists communication stocks to explore in Q4

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Highlights:

  • Net services revenue of T-Mobile US (TMUS) rose over four per cent YoY in Q3 FY22.
  • Omnicom Group Inc. (OMC) noted an organic revenue growth of over seven per cent in the latest quarter.
  • Revenue of Verizon Communications Inc. (VZ) jumped four per cent YoY in Q3 FY22.

The communication services sector consists of firms that offer wired, wireless, internet, and other related services. In addition, the companies also provide communication infrastructure for businesses as well as consumers.

Like other sectors, the communication sector comprises a host of companies with different operating models. For instance, some companies provide wired and wireless communication services, while some offers cable and other streaming-related services.

Communication stocks had gained traction during the COVID-19 period as demands for their services increased significantly at that time, as consumers are required to work remotely and shift to online channels.

However, the ongoing year was a bumpy journey for the sector, as investors kept their distance from risk-bet growth stocks due to higher inflation, rising interest rates, and other uncertainties in the market.

According to a Markets and Markets report, the global 5G IoT market is estimated to reach about US$ 40.2 billion through 2026 from US$ 2.6 billion in the prior year.  In addition, the market is expected to grow at a compound annual growth rate (CAGR) of 73 per cent during the projected period.

Today, we explore five communication stocks, including T-Mobile US, Inc. (NASDAQ: TMUS), Omnicom Group Inc. (NYSE: OMC), AT&T Inc. (NYSE: T), and Verizon Communications Inc. (NYSE: VZ) and see how they have performed amid the hovering concerns over the equity market:

T-Mobile US, Inc. (NASDAQ: TMUS)

The American wireless network solutions provider, T-Mobile US holds a market cap of US$ 183.57 billion. The company provides 5G network wireless network services to its clients and its P/E ratio was 119.23.

On November 10, the company said that it had expanded the "footprint" of its 5G home internet services across different states, including Illinois, Michigan, and Wisconsin. The company said that in these regions, millions still do not have access to high-speed internet.

However, with this expansion, the company claims its home internet service to be available for over six million homes throughout these states, and over 40 million homes in the US.

Meanwhile, T-Mobile US' revenue fell 0.7 per cent YoY and 1.1 per cent quarter-over-quarter (QoQ) to US$ 19.47 billion in Q3 FY22, while its diluted EPS slumped 27.3 per cent YoY to US$ 0.40 apiece.

However, the communication firm's net services revenue grew 4.3 per cent YoY to US$ 15.36 billion in the quarter. Its total net customer additions were 1.73 million in Q3 FY22, as compared to 1.32 million in the year-ago quarter.

Exploring its recent stock performance, the TMUS stock was up over 25 per cent YTD and about 23 per cent YoY. In the running quarter through Tuesday, November 15, it added about eight per cent and touched its 52-week high of US$ 154.3786 on November 2, 2022.

Omnicom Group Inc. (NYSE: OMC)

The major media, marketing, and corporate communications holding firm, Omnicom Group holds a dividend yield of 3.61 per cent. The company provides a range of services including advertising, customer relationship management, etc.

The media company's stock price rose four per cent year-to-date (YTD), and 10 per cent YoY. In the running quarter through November 15, it surged over 21 per cent.

Omnicom Group's revenue was US$ 3.44 billion in Q3 FY22, with organic growth of 7.5 per cent YoY, and its diluted EPS was US$ 1.77 apiece, against US$ 1.65 per share in the year-ago quarter.

AT&T Inc. (NYSE: T)

The multinational telecommunications holding firm, AT&T Inc's dividend yield was 5.83 per cent. The stock of the mobile telephone services provider was up over two per cent YTD and about one per cent YoY.

In the continuing quarter through Tuesday, November 15, it surged about 24 per cent, while touching its 52-week low of US$ 14.46 on October 13, 2022.

The US$ 137.20 billion market cap company announced an AT&T Point Plus Card from Citi on November 14. It is a new no-annual-fee card that would reward wireless clients with statement credits and Citi ThankYou Points on purchases.

AT&T Inc's revenue was down 4.1 per cent YoY to US$ 30 billion in Q3 FY22, due to the impact of US Video separation in July last year. Excluding the impact, the company's operating revenue for standalone AT&T soared 3.1 per cent YoY from US$ 29.1 billion in Q3 FY21.

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Verizon Communications Inc. (NYSE: VZ)

The telecommunication conglomerate firm, Verizon Communications Inc offers wireline voice, data services, wireless networking solutions, and other related services to its clients.

The firm, which engages in the provision of communications, information, and other services, holds a dividend yield of 6.81 per cent.

The latest quarter marked the fifth straight period when the company reported over 150,000 postpaid phone net additions.

Meanwhile, Verizon Communications' revenue rose four per cent YoY to US$ 34.2 billion in Q3 FY22, and its net income fell 23.3 per cent YoY to US$ 5 billion. Its revenue from the wireless service segment jumped 10 per cent YoY to US$ 18.8 billion in the quarter.

Bottom line:

Global digitalization has also bolstered gains in the communication services demand. However, the streaming sector was hit in recent months as companies have curbed their spending on digital advertisements due to recessionary concerns.

In addition, many consumers also dropped the streaming services amid a tight budget and cost-cut due to the increased borrowing costs.

However, the latest CPI data showed that the inflation cooled down in October, raising some hopes that the policymakers may ease their hawkish approach in their fight against inflation.

The Federal Reserve had already raised the interest rates to multi-year highs through 2022, to bring down the four decades of high inflation. This has weighed on the risk-bet appetite of the investors while forcing them to keep a distance from the mega-cap growth stocks.

So, investors should exercise due diligence, before putting their bets on any assets amid a turbulent market. Meanwhile, the S&P 500 communication services sector fell nearly 38 per cent YTD, while slipping about 40 per cent YoY.



 


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