The Zacks Wireless National industry appears well poised to benefit from healthy demand trends with the gradual revival in post-pandemic market conditions. However, high capital expenditure for infrastructure upgrades, margin erosion due to a challenging macroeconomic environment and supply-chain disruptions owing to continued chip shortage and tense geopolitical conditions have dented the industry’s profitability.
Nevertheless, AT&T Inc. T, Cambium Networks Corporation CMBM and Starry Group Holdings, Inc. STRY are likely to benefit in the long run from higher demand for scalable infrastructure for seamless connectivity with a wide proliferation of IoT and a faster pace of 5G rollout.
Industry Description
The Zacks Wireless National industry primarily comprises companies 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, 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 to where it is required and is most effective — whether in the cloud, the network, or on their premises.
What’s Shaping the Future of the Wireless National Industry?
Accelerated 5G & Fiber Optic Deployment: 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. The fiber-optic cable network is vital for backhaul and the last mile local loop, which are required by wireless service providers for 5G deployment. Fiber networks are also essential for the growing deployment of small cells that bring the network closer to the user and supplement macro networks to provide extensive coverage. 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.
Demand Supply Imbalance: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Unless the high investments generate healthy ROI in the long run, it is likely to weigh on the bottom line. In addition, the industry is continuously facing a shortage of chips, which are the building blocks for various equipment used by telecom carriers. Uncertainty regarding chip shortage and supply-chain disruptions leading to a dearth of essential fiber materials, shipping delays and shortages of other raw materials are likely to affect the expansion and rollout of new broadband networks. Extended lead times for basic components are also likely to impact the delivery schedule and escalate production costs. Moreover, high raw material prices due to 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 largely affected profitability due to inflated equipment prices.
Transition from Legacy Services to Cloud Architecture: Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers amid a challenging macroeconomic environment are eroding profits. A steady decline in linear TV subscribers and legacy services adds to the margin woes. Consequently, the firms within the industry are increasingly seeking diversification from legacy telecom services to more business, enterprise and wholesale opportunities. 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. This has realigned the companies’ 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, thereby boosting end-to-end provisioning time and driving standardization.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Wireless National industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #60, which places it at the top 24% 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 encouraging 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. The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
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, Sector
The Zacks Wireless National industry has outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector over the past year.
The industry has lost 5.3% over this period compared with the S&P 500 and the sector’s decline of 13.7% and 31.9%, 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 7.63X compared with the S&P 500’s 12.02X. It is also below the sector’s trailing 12-month EV/EBITDA of 8.83X.
Over the past five years, the industry has traded as high as 12.02X and as low as 5.46X and at the median of 6.95X, as the chart below shows.
Trailing 12-Month enterprise value-to-EBITDA (EV/EBITDA) Ratio
3 Wireless National Stocks Likely to Move Ahead of the Pack
AT&T: Based in Dallas, TX, AT&T is the second-largest wireless service provider in North America and one of the world’s leading communications service carriers. The company offers a wide range of communication and business solutions that include wireless, local exchange, long-distance, data/broadband and Internet, video, managed networking, wholesale and cloud-based services. The Zacks Consensus Estimate for current-year earnings has been revised 4.4% upward since July 2022, while that for the next year is up 6.3% over the same time frame. AT&T has spun off its media assets and merged them with the complementary assets of Discovery to focus on core businesses. With a customer-centric business model, AT&T is witnessing healthy momentum in its postpaid wireless business with a lower churn rate and increased adoption of higher-tier unlimited plans. It has a long-term earnings growth expectation of 3.4% and delivered an earnings surprise of 5.3%, on average, in the trailing four quarters. The stock has a VGM Score of B. AT&T carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: T
Starry Group: Headquartered in Boston, MA, Starry Group is a leading licensed fixed wireless technology developer and Internet service provider. Leveraging wideband hybrid-fiber fixed wireless technology, it is deploying gigabit-capable broadband to the home without bundles, data caps or long-term contracts. With a simple and accessible connectivity focus, the company aims to target the cord-cutters who are looking for alternative broadband options. The Zacks Consensus Estimate for current-year earnings has been revised 3.3% upward since August 2022. Starry Group carries a Zacks Rank #2.
Price and Consensus: STRY
Cambium: Headquartered in Rolling Meadows, IL, Cambium operates as a wireless solutions provider, connecting people with a flexible network infrastructure with a broad portfolio of fixed wireless broadband and Wi-Fi networking solutions. The innovative offerings enable the creation of a unified wireless fabric that spans multiple frequencies of Wi-Fi, managed centrally via the cloud. The Zacks Consensus Estimate for current-year earnings has been revised 65.3% upward since July 2022. Cambium is well-positioned to benefit from proprietary software and product ramp-up, likely facilitating it to deliver a compelling combination of price, performance and spectrum efficiency. One of its major advantages is its fixed wireless broadband networking infrastructure solutions, distinguished by embedded intelligence and scalability. It delivered an earnings surprise of 109.3%, on average, in the trailing four quarters and has a long-term earnings growth expectation of 16%. Cambium carries a Zacks Rank #3 (Hold).
Price and Consensus: CMBM
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AT&T Inc. (T) : Free Stock Analysis Report
Cambium Networks Corporation (CMBM) : Free Stock Analysis Report
Starry Group Holdings, Inc. (STRY) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Related Quotes
The stock market rally awaits Fed chief Jerome Powell and key economic data. Three Dow stocks are near buy points.
Yahoo Finance Live anchors discuss the rise in stock for Xpeng following the companies quarterly earnings.
Which stocks are either a fan favorite or a must-avoid? Penny stocks. These tickers going for less than $5 apiece are particularly divisive on Wall Street, with those in favor as well as the naysayers laying out strong arguments. These names are too appealing for the risk-tolerant investor to ignore. Given the low prices, you get more for your money. On top of this, even minor share price appreciation can translate to massive percentage gains, and thus, major returns for investors. However, ther
Atlas Technical Consultants, Inc. (ATCX) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank #2 (Buy).
OPEC oil output has fallen in November, led by top exporter Saudi Arabia and other Gulf members, after the wider OPEC+ alliance pledged steep output cuts to support the market amid a worsening economic outlook, a Reuters survey found on Wednesday. The Organization of the Petroleum Exporting Countries (OPEC)pumped 29.01 million barrels per day (bpd) this month, the survey found, down 710,000 bpd from October. In September, OPEC output had been the highest since 2020.
Does Steel Dynamics (STLD) have what it takes to be a top stock pick for momentum investors? Let's find out.
Its economic activity has this year been dampened by targeted lockdowns in response to COVID-19 outbreaks. Henry, head of the world's largest listed mining company, told the conference he expects to see an "increasing domestic drive towards economic growth in China". Henry said he expects China's steel sector to grow in 2023 as the economy starts responding to government stimulus efforts and its steel output, which dropped 3.4% in the first seven months of 2022, slowly recovers.
Verizon Communications Inc (NYSE: VZ) Verizon Business forged a global Network-as-a-Service (NaaS) partnership with Wipro Limited (NYSE: WIT), a technology services and consulting company, that will accelerate the network modernization and cloud transformation journey for businesses. Wipro's NaaS solution, powered by Verizon Business, will include a range of pre-configured and tested service chains on a subscription-based consumption model to drive network consumption infrastructure on demand. T
Meta Platforms Inc. CEO Mark Zuckerberg said Apple holds too much sway over the mobile-app ecosystem and that he is still optimistic about his company’s metaverse ambitions, even if they might not come to fruition for many years. “Apple has sort of singled themselves out as the only company that is trying to control, like unilaterally, what apps get on a device,” the chief executive said Wednesday at the New York Times ’ Dealbook Summit in New York City. Mr. Zuckerberg pointed out that Meta’s virtual-reality devices offer more freedom for developers by allowing them, for example, to extend consumer access to apps through stores of their choosing, or what is known as sideloading.
Ada, the customer-focused conversational AI leader, today announced the addition of Diego Lomanto as chief marketing officer and Ruby White as vice president of people to the Canadian unicorn's growing executive team.
Building on a "R&D 100" award-winning effort to run quantum cybersecurity technologies, EPB of Chattanooga and Qubitekk have joined together to launch America's first industry-led, commercially available quantum network designed for private companies as well as government and university researchers to run quantum equipment and applications in an established fiber optic environment. EPB Quantum NetworkSM is a quantum-as-a-service offering that will provide quantum technologists with fiber optic i
The four-day workweek: A dream of every worker since they started working. Proclaimed by CNN as one of the most important new global business ideas in 2022, a reduced workweek might soon become the…
Centralized intermediaries have seeped deep into the crypto user experience, but they continue to be its main path to adoption.
Does the November share price for V.F. Corporation ( NYSE:VFC ) reflect what it's really worth? Today, we will estimate…
UPDATED: CNN started to inform staffers of layoffs, as its chairman and CEO Chris Licht wrote that notices will go out on Wednesday and Thursday. “Today we will notify a limited number of individuals, largely some of our paid contributors, as part of a recalibrated reporting strategy,” Licht wrote in a memo, shared on Twitter […]
Profit from folly. Don’t participate in it.
Continued client outflows at Credit Suisse could spark speculation of a takeover of the embattled Swiss bank and may lead to the partial sale of its domestic unit, analysts at JPMorgan said on Thursday. Credit Suisse has reported steep outflows as wealthy clients move assets elsewhere, while the bank battles to recover from a string of scandals by focusing more on its flagship wealth management franchise and pruning back investment banking. JPMorgan said in a note to clients that it expected fourth-quarter outflows of 80 billion Swiss francs ($85 billion) in wealth management and 107 billion francs in total compared to the 84 billion total for this year as of Nov. 11.
Yahoo Finance Live checks out Xpeng shares following the EV developer's latest earnings report and production figures.
Cornerstone Wealth Senior Investment Analyst Sean Bandazian and Opimas CEO Octavio Marenzi examine the conditions surrounding fresh market gains following Fed Chair Powell's latest rate hike comments, while also discussing the market outlook, inflation, and mortgages in the housing market.
Most S&P 500 investors got a little gain this month. But investors willing to look off the beaten path found huge gains.
