1 Telecom Stock to Buy in 2023 and 1 to Sell Amid rising demand for efficient connectivity, the surge in 5G services, and increasing investments, the telecom industry is poised to witness significant growth in the near term. Given this backdrop,...
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Amid rising demand for efficient connectivity, the surge in 5G services, and increasing investments, the telecom industry is poised to witness significant growth in the near term. Given this backdrop, quality telecom stock Verizon Communications (VZ) might be a solid buy. However, FingerMotion (FNGR) could be best avoided, given its bleak fundamentals. Read on….
The telecom industry's growth is expected to continue in 2023, despite macroeconomic headwinds. The sector has several stand-out technologies and trends that would increasingly be leveraged to boost customer experience, network and business resilience, and value propositions.
Rising consumer demand for faster data speeds and extremely low latency, which enhances the user experience for VR, AR, Ultra-HD videos, and many more, are expected to propel the adoption of 5G services. As a result, the global 5G services market is anticipated to expand at a CAGR of 59.4% from 2023 to 2030.
Moreover, government and corporate spending to address digital equity should keep the industry buoyed. For example, as part of the Bipartisan Infrastructure Law, the Affordable Connectivity Program (ACP) provides eligible households $30 per month off their internet bills.
Furthermore, the global telecom services market was valued at $1.81 trillion in 2022 and is expected to expand at a CAGR of 6.2% from 2023 to 2030. Furthermore, the SPDR S&P Telecom ETF (XTL) has gained 6.8% over the past month and 6% over the past six months, substantiating investors' interest in telecom stocks.
Hence, it could be wise to opt for fundamentally sound telecom stock Verizon Communications Inc. (VZ) in 2023. However, FingerMotion, Inc. (FNGR) might be best avoided due to its weak fundamentals.
Stock to Buy:
Verizon Communications Inc. (VZ)
VZ offers communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. It operates through two segments: Consumer and Business.
On January 12, 2023, VZ announced the launch of Verizon Mobile for Microsoft Teams. This new service integrates mobile devices with Microsoft Teams for easier calling and collaboration as part of its strategic relationship with Microsoft Corporation (MSFT). This collaboration with the tech giant is likely to be beneficial.
On December 1, 2022, VZ announced a quarterly dividend of 65.25 cents per outstanding share, payable to its shareholders on February 1, 2023. The company made approximately $8.10 billion in cash dividend payments in the last three quarters. This reflects the cash generation ability of the company.
On November 30, VZ Business announced a global Network-as-a-Service (NaaS) partnership with Wipro Limited (WIT) to accelerate the network modernization and cloud transformation journey for businesses. This partnership is expected to enable businesses to future-proof their network in a more flexible, agile, and predictive manner, centered around their specific needs.
For the fiscal fourth quarter that ended December 31, 2022, VZ's total operating revenues increased 3.5% year-over-year to $35.25 billion. The company's wireless equipment revenue grew 4.1% from the prior-year period to $7.63 billion. Net income rose 41.4% year-over-year to $6.70 billion, while its adjusted EPS stood at $1.19 for the same quarter.
Analysts expect VZ's revenue for the fiscal first quarter (ending March 2023) to increase 1.2% year-over-year to $33.94 billion. For the same quarter, EPS is expected to come in at $1.19. The company shows an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 10.5% to close the last trading session at $40.27. It has also gained 4.8% over the past month.
VZ's POWR Ratings reflect this positive outlook. VZ has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The company has a B grade for Growth and Stability. Within the Telecom – Domestic industry, it is ranked #5 among 19 stocks.
Click here to see the additional POWR Ratings of VZ (Value, Momentum, Sentiment, and Quality).
Stock to Avoid:
FingerMotion, Inc. (FNGR)
FNGR provides mobile payment and recharge platform solutions. The company offers telecommunication providers' products and services, including data plans, subscription plans, mobile phones, and loyalty points redemption services.
FNGR's trailing-12-month gross profit margin of 8.12% is 83.9% lower than the industry average of 50.32%. Its trailing-12-month EBITDA margin and net income margin of negative 23.40% and 26.20% compare to the industry averages of 18% and 3.94%, respectively.
FNGR's gross profit for the fiscal third quarter ended November 30, 2022, declined 11.2% year-over-year to $0.86 million. The company's net loss from operations widened 75% year-over-year to $1.86 million. Net loss attributable to the company's shareholders widened 143.3% year-over-year to $2.52 million. Additionally, its net loss per share stood at $0.06, up 200% from the prior-year period.
Street expects FNGR's EPS to decline 100% year-over-year to negative $0.24 for the fiscal year 2023 (ending February).
The stock has lost 40.1% over the past three months to close the last trading session at $3.78. Over the past year, it has lost 22.9%.
FNGR's bleak prospects are reflected in its POWR Ratings. The company has an overall rating of F, which equates to a Strong Sell in our proprietary rating system.
In addition, it has an F grade for Quality and a D for Value, Momentum, and Stability. It is ranked #18 in the same industry.
Click here to see the additional ratings of FNGR for Growth and Sentiment.
VZ shares fell $0.02 (-0.05%) in premarket trading Friday. Year-to-date, VZ has gained 3.81%, versus a 5.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy.Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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