Amid the current macroeconomic uncertainty, investors are scared to burn their fingers on risky stocks. However, telecommunications stocks provide the potential for significant growth in the long term. With the high demand for faster connectivity through 5G, the industry is expected to be revolutionized.
The global 5G infrastructure market is expected to reach $48.66 billion by 2028. The market is estimated to grow at a CAGR of 64.8% from 2022 to 2028 due to rising demand for high-speed and broad network coverage for mobile data services.
On top of it, the global telecom network infrastructure market is projected to surpass $180 billion by 2032, growing at a CAGR of 6% from 2023 to 2032.
Amid this backdrop, investors could benefit from the fundamentally strong telecom stock Verizon Communications Inc. (VZ). On the other hand, it could be wise to avoid FingerMotion, Inc. (FNGR) 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.
Over the last three years, VZ’s dividend payouts have grown at a 2% CAGR. Its four-year average dividend yield is 4.67%, and its forward annual dividend of $2.61 per share translates to a 6.31% yield on prevailing prices. The company is expected to pay a quarterly dividend of $0.65 per share on February 1, 2023.
On November 30, 2022, VZ Business announced a global Network-as-a-Service (NaaS) partnership with Wipro Limited (WIT) that would accelerate network modernization and cloud transformation journey for businesses.
Senior Vice President and Chief Revenue Officer of VZ’s Global Enterprise and Public Sector, Massimo Peselli, believes that the partnership with WIT would enable businesses to future-proof their network in a manner that is more flexible, agile, predictive, and centered around their specific needs.
For the fiscal third quarter ended September 30, 2022, VZ’s total operating revenues increased 4% year-over-year to $34.24 billion. The company’s wireless equipment revenue grew 22.9% from the prior-year period to $6.58 billion. Its total assets came in at $375.09 billion as of September 30, 2022, compared to $366.60 billion for the fiscal year ended December 31, 2021.
Analysts expect VZ’s revenue for the quarter ended December 31, 2022, to increase 3.6% year-over-year to $35.30 billion. The company shows an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past three months, the stock has gained 11.5% to close the last trading session at $41.37.
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.
Within the Telecom - Domestic industry, it is ranked #4 out of 19 stocks. The company has a B grade for Growth and Stability. Click here to see the additional POWR Ratings of VZ for Value, Momentum, Sentiment, and Quality.
Stock to Avoid:
FingerMotion, Inc. (FNGR)
FNGR, a mobile data specialist company, 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 10.72% is 78.7% lower than the industry average of 50.32%. Its trailing-12-month ROCE of negative 150.68% compares to the industry average of 5.81%.
FNGR’s revenue for the fiscal second quarter ended August 31, 2022, declined 7.5% year-over-year to $4.98 million. The company’s net loss from operations widened 7.6% year-over-year to $1.49 million.
Net loss attributable to the company’s shareholders widened 5.6% year-over-year to $1.54 million. Moreover, its net loss per share came in at $0.04.
The stock has fallen 48% over the past three months to close the last trading session at $3.84.
FNGR’s grim outlook is reflected in its POWR Ratings. The company has an overall F rating, which equates to a Strong Sell. It is ranked #18 in the same industry.
In addition, it has an F grade for Quality and a D for Value, Momentum, and Stability. Click here to access the additional ratings of FNGR (Growth and Sentiment).
VZ shares were trading at $41.78 per share on Tuesday afternoon, up $0.41 (+0.99%). Year-to-date, VZ has gained 7.71%, versus a 1.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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