The telecommunications industry is poised for expansion, driven by a rising need for improved connectivity and the swift growth of the 5G technology and infrastructure market. Therefore, telecom stocks Globalstar, Inc. (GSAT) and Verizon Communications Inc. (VZ) could be solid watchlist additions for potential entry opportunities in 2024.
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the industry’s prospects.
The telecom sector is propelled by increasing demands for high-speed, low-latency connectivity and a growing array of connected devices. Moreover, the expansion of 5G technology and infrastructure worldwide is set to transform sectors like healthcare, automotive, and manufacturing, driving market growth. The global telecom services market size is expected to expand at a CAGR of 6.2% from 2023 to 2030.
Likewise, the surge in new technologies like the Internet of Things (IoT) and artificial intelligence (AI) is driving the need for advanced telecom infrastructure. The global artificial intelligence in the telecom market is projected to reach $14.50 billion by 2033, growing at a CAGR of 28.5%.
Moreover, the rapid digital transformation across industries, increased data consumption, and the surge in internet and mobile device penetration drive the telecom cloud industry. The global telecom cloud market size is expected to expand at a CAGR of 19.9% from 2022 to 2030.
Considering these conducive trends, let’s take a look at the fundamentals of the two Telecom - Domestic stocks worth adding to your watchlist, starting with the second choice.
Stock #2: Globalstar, Inc. (GSAT)
GSAT provides mobile satellite services worldwide. The company offers duplex two-way voice and data products, including mobile voice and data satellite communications services and equipment for remote business continuity, recreational usage, safety, emergency preparedness and response, and other applications.
On December 6, 2023, GSAT launched GSatSolar, a low-cost, solar-powered satellite tracker designed for remote IoT operations and off-grid asset tracking. The device, in partnership with Global Satellite Engineering (GSE), enhances the tracking capabilities of VARs and customers, providing reliable data collection in the field for improved efficiency and true remote IoT autonomous tracking.
Jake Rembert, VP of sales at GSAT, said, “GSatSolar is a low-cost option to monitor assets remotely on the Globalstar LEO network and delivers a plethora of verified IoT data across IoT applications. The GSatSolar is a versatile solution that expands our satellite tracking capabilities. As with all our IoT asset tracking solutions, it features low power, long life and is equipped to perform.”
In terms of the trailing-12-month Capex/Sales, GSAT’s 69.64% is significantly higher than the 4.09% industry average. Its 41.55% trailing-12-month EBITDA margin is 120% higher than the 18.88% industry average. However, its 0.26x trailing-12-month asset turnover ratio is 50.2% lower than the industry average of 0.52x.
For the fiscal third quarter that ended September 30, 2023, GSAT’s total revenue increased 53.3% year-over-year to $57.68 million. Its income from operations came in at $2.02 million, compared to a loss from operations of $186.64 million in the year-ago quarter.
Also, its net loss narrowed 97% over the prior year quarter to $6.17 million. Additionally, the company’s adjusted EBITDA came in at $32.01 million, up 124.8% year-over-year.
Street expects GSAT’s revenue for the quarter ending December 31, 2023, to increase 28% year-over-year to $52.87 billion. However, its EPS for the fiscal 2023 is expected to remain negative. Over the past nine months, the stock has gained 97.6% to close the last trading session at $1.95.
GSAT’s POWR Ratings reflect an uncertain outlook. It has an overall C rating that translates to a Neutral in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Growth, Momentum, Stability, and Quality. It is ranked #10 out of 16 stocks in the Telecom - Domestic industry. To access GSAT’s ratings for Value and Sentiment, click here.
Stock #1: Verizon Communications Inc. (VZ)
VZ provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments: Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
In terms of the trailing-12-month Return on Common Equity, VZ’s 22.56% is 562.5% higher than the 3.41% industry average. Its 7.04% trailing-12-month Return on Total Capital is 98.1% higher than the 3.55% industry average. On the other hand, its 0.35x trailing-12-month asset turnover ratio is 31.5% lower than the industry average of 0.52x.
In the third quarter ending September 30, 2023, VZ’s total operating revenues came in at $33.34 billion. The company’s total operating expenses declined 1.8% year-over-year to $25.86 billion. Its net income and earnings per common share came in at $4.88 billion and $1.13, representing a decrease of 2.8% and 3.4% over the prior-year quarter, respectively.
However, as of September 30, 2023, its total assets stood at $384.83 billion, compared to the total assets of $379.68 billion as of December 31, 2022.
Analysts expect VZ’s revenue for the quarter ending March 31, 2024, to increase 1.7% year-over-year to $33.48 billion. However, its EPS for the quarter ending December 31, 2023, is expected to decrease 8.9% year-over-year to $1.08. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 15.2% to close the last trading session at $37.31.
VZ’s bleak prospects are reflected in its POWR Ratings. It has an overall C rating that translates to a Neutral in our proprietary system.
It has a C grade for Value, Momentum, and Sentiment. Within the same industry, it is ranked #14. To see VZ’s Growth, Stability, and Quality ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VZ shares rose $0.01 (+0.03%) in premarket trading Thursday. Year-to-date, VZ has gained 1.56%, versus a 26.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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