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3 Wireless Stocks Set to Ride High on the Thriving 5G Ecosystem
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The Zacks Wireless National industry is likely to benefit from healthy demand trends with an accelerated 5G rollout and increased fiber densification, helping bridge the digital divide with seamless connectivity. However, high capital expenditures for infrastructure upgrades, margin erosion, supply-chain disruptions and high customer inventory levels have dented the industry’s profitability.
Nevertheless, Cogent Communications Holdings, Inc. (CCOI - Free Report) , Liberty Latin America Ltd. (LILA - Free Report) and ATN International, Inc. (ATNI - Free Report) are likely to gain from higher demand for scalable infrastructure for sustainable networks and fostering innovation with a wide proliferation of Internet of Things (IoT), wireless traction and solid broadband momentum.
Industry Description
The Zacks Wireless National industry primarily comprises firms that provide a comprehensive range of communication services and business solutions. These include wireless, wireline, local exchange, long-distance calls, data/broadband and Internet, video, managed networking, messaging, wholesale and cloud-based services to retail consumers. The firms within the industry also offer IP-based voice and data services, targeted advertising, television, streaming content, cable networks and publishing operations, multiprotocol label switching networking, fiber optic long-haul networks and hosting and communications systems to businesses and government agencies. In addition, the firms provide edge computing services that allow businesses to route application-specific traffic where required and are most effective — whether in the cloud, the network, or on their premises.
What's Shaping the Future of the Wireless National Industry?
Software-Centric Network Rationalization: The industry participants are realigning their wireless network toward a software-centric model to cater to increasing business demands and customer needs through remote facilities. The industry players are focused on bringing improved operational efficiencies through network simplification and rationalization, boosting end-to-end provisioning time and driving standardization. Moreover, the firms are offering a variety of pathways for delivering services through a combination of network-based video transcoding, packaging, storage and compression technologies to provide new IP video formats, live TV, streaming services and home gateways to connected devices inside and outside the home.
Price-Sensitive Competition: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers in a challenging macroeconomic environment are eroding profits. The companies are making significant investments to upgrade their network and product portfolio, including considerable advances in software-defined, wide-area network capabilities and a new Cloud Core architecture that squeeze margins. High raw material prices due to the Middle-East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedule of various firms. The demand-supply imbalance has crippled operations and affected profitability due to inflated equipment prices. Wireless operators have been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.
5G Ecosystem Gaining Traction: Most industry participants are deploying the latest 4G LTE Advanced technologies to deliver higher peak data speeds and capacity, driven by customer-focused planning, disciplined engineering and investments for infrastructure upgrades. The companies are also expanding their fiber optic networks to support 4G LTE and 5G wireless standards as well as wireline connections. Further, leading firms within the industry have been deploying the C-Band spectrum to gain additional coverage. These mid-band airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in rural and urban areas compared with mmWave. With low latency and increased bandwidth, business enterprises are increasingly embracing the exciting possibilities offered by artificial intelligence and the IoT via the real-time transfer of mobile data. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Wireless National industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #89, which places it in the top 35% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates rosy prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few wireless national stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms S&P 500, Lags Sector
The Zacks Wireless National industry has outperformed the S&P 500 composite but lagged the broader Zacks Computer and Technology sector over the past year.
The industry has jumped 38.5% over this period compared with the S&P 500 and the sector’s growth of 31.1% and 39.8%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 8.41X compared with the S&P 500’s 19.15X. It is also below the sector’s trailing 12-month EV/EBITDA of 18.49X.
Over the past five years, the industry has traded as high as 8.93X, as low as 5.46X and at the median of 7.21X, as the chart below shows.
Trailing 12-Month enterprise value-to-EBITDA (EV/EBITDA) Ratio
3 Wireless National Stocks to Keep a Close Eye on
Cogent: Headquartered in Washington, DC, Cogent is a Tier 1 Internet Service Provider (ISP) that offers low-cost, high-speed Internet access, private network services and colocation center services with ultra-low latency data transmission. It addresses the dynamic needs of various small and medium-sized businesses, ISPs and other bandwidth-intensive organizations across the globe. The company offers state-of-the-art colocation data center services that provide constant power supply and backup generators, making it ideal for disaster recovery and data backup. Its data centers are known for providing a conducive environment for coherent connectivity, security, availability and performance to its end customers. High-speed bandwidth and dedicated Internet access remain its highest priority, backed by a team of committed customer support and local provisioning teams to clinch maximum reliability. The stock has gained 11.4% in the past year and delivered an earnings surprise of 19.7%, on average, in the trailing four quarters. Cogent carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CCOI
Liberty Latin America: Based in Denver, CO, Liberty Latin America is a communications firm with operations in Chile, Puerto Rico, the Caribbean and other parts of Latin America. The stock has gained 18.7% in the past year. It has a VGM Score of B. Liberty Latin America is poised to benefit from an end-to-end communications platform, leveraging the power of a sub-sea network, fixed-line networks & mobile platforms. With an expanded regional footprint and upgraded infrastructure facilities, it is likely to deliver enterprise-grade connectivity, data center, hosting and managed solutions and IT services. It carries a Zacks Rank #2 (Buy).
Price and Consensus: LILA
ATN International: Headquartered in Beverly, MA, ATN International offers digital infrastructure and communications services with a focus on rural and remote markets. The company is progressing steadily with its “Glass-and-Steel” network expansion strategy and is gradually moving away from the legacy wireless wholesale business. The acquisition of Sacred Wind Enterprises by Commnet Broadband, which is a wholly owned subsidiary of ATN International, is likely to extend its regional footprint with a complementary portfolio. It is aiming to focus more on the rural markets to augment its leading position with support from government stimulus programs for broadband deployment in under-served areas. ATN International has a long-term earnings growth expectation of 10%. This Zacks Rank #3 stock has a VGM Score of A.
Price and Consensus: ATNI
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3 Wireless Stocks Set to Ride High on the Thriving 5G Ecosystem
The Zacks Wireless National industry is likely to benefit from healthy demand trends with an accelerated 5G rollout and increased fiber densification, helping bridge the digital divide with seamless connectivity. However, high capital expenditures for infrastructure upgrades, margin erosion, supply-chain disruptions and high customer inventory levels have dented the industry’s profitability.
Nevertheless, Cogent Communications Holdings, Inc. (CCOI - Free Report) , Liberty Latin America Ltd. (LILA - Free Report) and ATN International, Inc. (ATNI - Free Report) are likely to gain from higher demand for scalable infrastructure for sustainable networks and fostering innovation with a wide proliferation of Internet of Things (IoT), wireless traction and solid broadband momentum.
Industry Description
The Zacks Wireless National industry primarily comprises firms that provide a comprehensive range of communication services and business solutions. These include wireless, wireline, local exchange, long-distance calls, data/broadband and Internet, video, managed networking, messaging, wholesale and cloud-based services to retail consumers. The firms within the industry also offer IP-based voice and data services, targeted advertising, television, streaming content, cable networks and publishing operations, multiprotocol label switching networking, fiber optic long-haul networks and hosting and communications systems to businesses and government agencies. In addition, the firms provide edge computing services that allow businesses to route application-specific traffic where required and are most effective — whether in the cloud, the network, or on their premises.
What's Shaping the Future of the Wireless National Industry?
Software-Centric Network Rationalization: The industry participants are realigning their wireless network toward a software-centric model to cater to increasing business demands and customer needs through remote facilities. The industry players are focused on bringing improved operational efficiencies through network simplification and rationalization, boosting end-to-end provisioning time and driving standardization. Moreover, the firms are offering a variety of pathways for delivering services through a combination of network-based video transcoding, packaging, storage and compression technologies to provide new IP video formats, live TV, streaming services and home gateways to connected devices inside and outside the home.
Price-Sensitive Competition: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers in a challenging macroeconomic environment are eroding profits. The companies are making significant investments to upgrade their network and product portfolio, including considerable advances in software-defined, wide-area network capabilities and a new Cloud Core architecture that squeeze margins. High raw material prices due to the Middle-East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedule of various firms. The demand-supply imbalance has crippled operations and affected profitability due to inflated equipment prices. Wireless operators have been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry. Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.
5G Ecosystem Gaining Traction: Most industry participants are deploying the latest 4G LTE Advanced technologies to deliver higher peak data speeds and capacity, driven by customer-focused planning, disciplined engineering and investments for infrastructure upgrades. The companies are also expanding their fiber optic networks to support 4G LTE and 5G wireless standards as well as wireline connections. Further, leading firms within the industry have been deploying the C-Band spectrum to gain additional coverage. These mid-band airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in rural and urban areas compared with mmWave. With low latency and increased bandwidth, business enterprises are increasingly embracing the exciting possibilities offered by artificial intelligence and the IoT via the real-time transfer of mobile data. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Wireless National industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #89, which places it in the top 35% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates rosy prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few wireless national stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms S&P 500, Lags Sector
The Zacks Wireless National industry has outperformed the S&P 500 composite but lagged the broader Zacks Computer and Technology sector over the past year.
The industry has jumped 38.5% over this period compared with the S&P 500 and the sector’s growth of 31.1% and 39.8%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 8.41X compared with the S&P 500’s 19.15X. It is also below the sector’s trailing 12-month EV/EBITDA of 18.49X.
Over the past five years, the industry has traded as high as 8.93X, as low as 5.46X and at the median of 7.21X, as the chart below shows.
Trailing 12-Month enterprise value-to-EBITDA (EV/EBITDA) Ratio
3 Wireless National Stocks to Keep a Close Eye on
Cogent: Headquartered in Washington, DC, Cogent is a Tier 1 Internet Service Provider (ISP) that offers low-cost, high-speed Internet access, private network services and colocation center services with ultra-low latency data transmission. It addresses the dynamic needs of various small and medium-sized businesses, ISPs and other bandwidth-intensive organizations across the globe. The company offers state-of-the-art colocation data center services that provide constant power supply and backup generators, making it ideal for disaster recovery and data backup. Its data centers are known for providing a conducive environment for coherent connectivity, security, availability and performance to its end customers. High-speed bandwidth and dedicated Internet access remain its highest priority, backed by a team of committed customer support and local provisioning teams to clinch maximum reliability. The stock has gained 11.4% in the past year and delivered an earnings surprise of 19.7%, on average, in the trailing four quarters. Cogent carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CCOI
Liberty Latin America: Based in Denver, CO, Liberty Latin America is a communications firm with operations in Chile, Puerto Rico, the Caribbean and other parts of Latin America. The stock has gained 18.7% in the past year. It has a VGM Score of B. Liberty Latin America is poised to benefit from an end-to-end communications platform, leveraging the power of a sub-sea network, fixed-line networks & mobile platforms. With an expanded regional footprint and upgraded infrastructure facilities, it is likely to deliver enterprise-grade connectivity, data center, hosting and managed solutions and IT services. It carries a Zacks Rank #2 (Buy).
Price and Consensus: LILA
ATN International: Headquartered in Beverly, MA, ATN International offers digital infrastructure and communications services with a focus on rural and remote markets. The company is progressing steadily with its “Glass-and-Steel” network expansion strategy and is gradually moving away from the legacy wireless wholesale business. The acquisition of Sacred Wind Enterprises by Commnet Broadband, which is a wholly owned subsidiary of ATN International, is likely to extend its regional footprint with a complementary portfolio. It is aiming to focus more on the rural markets to augment its leading position with support from government stimulus programs for broadband deployment in under-served areas. ATN International has a long-term earnings growth expectation of 10%. This Zacks Rank #3 stock has a VGM Score of A.
Price and Consensus: ATNI