7 telecommunications stocks left behind
In the 1990s, there were a lot of high-flying telecom stocks. Cell phones were common and consumers bought them. The demand was so high that many small regional telecoms sprang up to serve the new growing market. Then came the era of smartphones, and another opportunity to reap the rewards.
When the global Covid-19 pandemic struck in 2020, the demand for remote connectivity exploded.
However, many telecom stocks have fallen out of favor with investors over the past five years. Companies have racked up massive debt as they rush to upgrade infrastructure and wireless spectrum to support 5G. At the same time, consumers are no longer buying new smartphones as they once did.
Consolidation creates new giants and disrupts the hierarchy of the industry. Due to the challenges and the changing landscape, these telecom values are being left behind.
There are still telecommunications stocks that offer long-term growth prospects. But the companies listed here? Unless something changes, they are best avoided by growth investors. I mentioned the cost of 5G infrastructure a moment ago. If you are interested in companies that are ready to reap the rewards of the switch to 5G, here are some suggestions.
- AT&T Inc. (NYSE:T)
- Mobil’nye Telesistemy PAO (NYSE:MBT)
- Orange SA (NYSE:ORAN)
- Telephone and Data Systems, Inc. (NYSE:TDS)
- United States Cellular Society (NYSE:USM)
- Verizon Communications Inc. (NYSE:VZ)
- Vonage Holdings Corp. (NASDAQ:VG)
Telecom Stocks to Be Left Behind: AT&T (T)
AT&T in 2007 was flying high. It was the largest wireless operator in the country in terms of subscribers. It was granted the rights to be the exclusive carrier for the iPhone, the trendy new device that ushered in the smartphone era. Investors were happy with the T-share rallying after a difficult 2004. That year, the T share exceeded $ 42.
In 2011, the picture was decidedly less pretty. Rival Verizon has acquired the ability to sell iPhones, ending AT&T exclusivity. Verizon overtook AT&T to become the nation’s largest carrier. Last fall, amid industry consolidation, AT&T slipped to third place.
The company went into debt to acquire the satellite supplier DirecTV for a total of $ 67 billion in 2015, just as Internet video streaming services were on the rise. The company announced in February that it was pulling away from DirecTV – making $ 7.8 billion. In 2018, he paid $ 85 billion for the media giant Time warner, only to announce an agreement several months ago to separate WarnerMedia as part of a proposed video streaming service.
AT&T is in debt, in a responsive place, and faces tougher competition than ever in the wireless market. It’s a poster for telecom stocks that are being left behind.
At the time of publication, the T-share has achieved a “D” rating in Portfolio filing cabinet.
Mobile Telesystems (MBT)
Mobil’nye Telesistemy PAO – or MTS – is Russia’s largest wireless operator. Like many telecommunications stocks, this company has also shifted from its core business to areas such as media streaming and even online banking.
In its final quarter, MTS was showing positive signs, including revenue up 10.6% year-on-year. The company also improved its full-year revenue forecast to achieve high single-digit growth.
However, MTS is only just beginning to roll out cellular 5G, a project that will be very capital intensive for years to come. In addition, the stock of MBT has been a non-performing for ages. It has only grown by 3% so far in 2021. After dropping steeply in 2014 (losing two-thirds of its value in that year), MBT has hardly disappeared anywhere since.
The stream Portfolio filing cabinet The rating for the MBT share is “D”.
Telecoms actions to be left aside: Orange (ORAN)
Orange is a well-known multinational telecommunications company based in France. Investment analysts generally have a positive view of the company. Those interviewed by CNN Affairs evaluate the ORAN share as a “buy” consensus.
Why is Orange on a list of telecom stocks that risk being left behind?
The ORAN share tested investors. It is subject to wild fluctuations, but ultimately barely moved the needle between 2014 and 2020. ORAN had not yet fully recovered from the covid-19-induced stock market crash of 2020 and is currently down 17% compared to its pre-crash value. It’s also down around 6% so far in 2021. It’s not the kind of performance that would make ORAN a recommendation in a growth equity portfolio.
The ORAN share was rated “D” in Portfolio filing cabinet at the time of publication.
Telephone and Data Systems (TDS)
Telephone and Data Systems (better known as TDS) is an American telecommunications company that provides hosted wireless, broadband, television and computer services. It is perhaps best known for its subsidiary USCellular (the country’s fourth largest wireless operator) and TDS Telecom (its division for high-speed internet and home phone services).
TDS faces significant infrastructure costs for TDS Telecom, which is responsible for upgrading connections to fiber. In its second quarter earnings report, the company estimated capital spending for the full year to be between $ 425 million and $ 475 million. To help pay for those costs, the company announced a new share offering in August.
TDS stock was worth nearly $ 38 at the start of 2019, but is currently trading at just under $ 20.
The most recent rating for TDS stock in Portfolio filing cabinet is “F”.
Leave-behind Telecommunications Stock: USCellular (USM)
USCellular joins parent company TDS on this list of telecommunications stocks that are being left behind. Like TDS, USCellular faces significant capital expenditures. In the second quarter, the company was still in the testing phase for 5G, but expects to spend between $ 775 million and $ 875 million this year to modernize its network.
Telecoms are in a difficult position. His subscriber base has shrunk over the past decade and he has to spend a lot to stay competitive. At the same time, the competition is consolidating and growing. To add to the challenge, USCellular customer satisfaction declined significantly from 2019 and now ranks well below other US mobile carriers.
USM stock had been showing signs of life since mid-2018, but fell in 2019. At this point, despite an increase in early summer, USM is down almost 8% over the years. Last 12 months.
At the time of publication, the Portfolio filing cabinet The rating for USM stock is “F”.
Verizon is the largest US wireless operator. Its total number of wireless subscribers exceeded 121 million in June. However, staying on top will be a battle. Its newly consolidated second-place competitor is “wiping the floor” with Verizon’s 5G service.
Verizon says 20% of its subscribers are now on 5G, but it is spending a lot to get them there. The company predicts capital spending will be between $ 17.5 billion and $ 18.5 billion in 2021. Having a 5G network that performs so poorly against the competition despite the huge expense is not a good sign .
VZ’s stock has been in growth mode since 2010, but it more or less plateaued in 2018. Over the past 12 months, it has fallen by more than 8%. It’s not a good image and it could just get worse as the fight for the number one position escalates.
I’m not the only one who thinks you should avoid Verizon. The 27 financial analysts followed by the the Wall Street newspaper have the VZ action noted as a “Keep” consensus.
VZ stock currently achieves a “D” rating in Portfolio filing cabinet.
Telecommunications stocks to be left behind: Vonage (VG)
Finally, we come to Vonage. This company got its start providing low-cost Internet-based voice over IP (VoIP) residential telephone services. It becomes a tough sell when smartphones, social media services, and smart speakers offer the same thing, for free.
The Vonage Business Cloud system integrates key services like voice, text, video conferencing and collaboration tools into a single suite. There is enormous competition in the space from much larger companies. The pandemic, with its rise remote work, has only intensified competition.
Vonage shares have surged several times over the past few years and then fell rapidly. We are currently in the midst of another surge (VG stock has increased 40% in the past 12 months). If it follows the pattern of the past five years, VG may need to undergo a correction. Additionally, the focus on outdated VoIP phone service and its vulnerability to much greater competition in the corporate communication / collaboration space puts Vonage at risk.
The VG stock was noted “D” in Portfolio filing cabinet at the time of publication.
At the time of publication, neither Louis Navellier nor the InvestorPlace research staff member primarily responsible for this article held (directly or indirectly) a position in the titles mentioned in this article.
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