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3 Stocks to Watch From the Thriving Wireless Non-US Industry
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Companies in the Zacks Wireless Non-US industry are benefiting from accelerated investments in network infrastructure, including the deployment of cutting-edge 5G technology. The industry participants are focused on providing high-quality and affordable services while expanding their customer base and identifying new revenue streams in a competitive market.
America Movil, S.A.B. de C.V. (AMX - Free Report) , Vodafone Group Public Limited Company (VOD - Free Report) and TIM S.A. (TIMB - Free Report) have significant growth opportunities offered by the deployment of advanced 4G LTE and 5G technology along with the wide proliferation of data traffic for the Internet of Things (IoT).
Industry Description
The Zacks Wireless Non-US industry comprises mobile telecommunications and broadband service providers based on foreign shores. These companies primarily offer voice services, including local, domestic and international calls, roaming services, and prepaid and postpaid. They provide value-added services, such as the IoT, comprising logistics and fleet management and automotive and health solutions. They also offer content streaming, interactive applications, wireless security services and mobile payment solutions. Some industry players sell mobile handsets and accessories through dealer networks and offer co-billing services to other telecommunications service providers. These firms provide IT solutions and cable and satellite pay television subscriptions as well as data services and hosting services to residential and corporate clients.
What's Shaping the Future of Wireless Non-US Industry
Deployment of Advanced 4G LTE & 5G: There has been an exponential growth of mobile broadband traffic and home Internet solutions driven by the work-from-home trend with an increase in user demand for coverage and speed. This has resulted in strong demand for innovative networking architecture as service providers aim to upgrade their networks to support the surge in data traffic. There is a continuous need for network tuning and optimization to maintain superior performance standards, creating demand for state-of-the-art wireless products and services. Moreover, a faster pace of 5G deployment worldwide is likely to propel the industry to newer heights. It is likely to augment the scalability, security and universal mobility of the telecom industry, which will propel the proliferation of IoT. Expansion of fiber optic networks by carriers to support their 4G LTE and 5G wireless standards are acting as tailwinds.
Aggressive Competition to Persist: Telecom services show a weak correlation to macroeconomic factors as these are deemed to be necessities. Wireless operators have been facing challenges due to the churn rate and 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. The companies follow an aggressive promotional strategy to increase penetration in the smartphone market. However, these efforts tend to affect profitability in the near term. Mobile phone operators also need to take measures to reduce costs and optimize business operations. Aggressive competition could limit their ability to attract and retain customers and affect operating and financial results.
Growing Demand for Superior Connectivity: In addition to delivering mission-critical communication services, the companies are taking steps to accelerate subscriber additions and improve churn management. They aim to offer an exceptional wireless experience to consumers and business customers by providing superior network connectivity. The wireless carriers are expanding their footprint while adopting unlimited plans to enhance average revenue per user. They are progressing on strategic objectives, growing customer base by increasing handset connections and customer loyalty to boost revenues and profitability. Furthermore, the industry participants are taking a holistic approach to content delivery. They are offering various pathways for delivering services through a combination of network-based video transcoding and compression technologies to offer IP video formats, live TV and streaming services.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Wireless Non-US industry, which has 13 constituent companies, is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #81, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong near-term 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 an outcome of a positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. Over the past 10 months, the industry’s earnings estimates for the current year and the next have increased 61.5% and 75.4%, respectively.
Before we present a few non-US wireless stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms Sector, Lags S&P 500
The Zacks Wireless Non-US industry has outperformed the broader Zacks Computer and Technology sector but lagged the S&P 500 composite in the past year.
The industry has gained 3.7% over this period compared with the S&P 500’s rise of 6.2%. Meanwhile, the sector has lost 9.6%.
One-Year Price Performance
Industry's Current Valuation
The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing wireless stocks. The industry currently has a trailing 12-month EV/EBITDA of 9.37X compared with the S&P 500’s 14.41X. It is also trading below the sector’s trailing 12-month EV/EBITDA of 12.56X.
Over the past five years, the industry has traded as high as 21.96X, as low as 3.85X, with a median of 9X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (Past Five Years)
3 Non-US Wireless Stocks to Watch
America Movil: Based in Mexico, America Movil provides telecommunication services in Latin America and globally. The company is working on developing alternatives to reap more benefits from its tower assets while increasing shareholders’ value and reducing debt. It offers customers a portfolio of value-added services and improved communications solutions in 25 countries in Latin America, the United States and Central and Eastern Europe. The company leveraged the investments it has made over the years in the latest technologies that enhanced the capacity and reach of its platforms, enabling it to handle significant traffic increases with no detriment to quality or speed. It is expected to benefit from a growing subscriber base and focused 5G efforts. The Zacks Consensus Estimate for its current-year earnings has been revised 14.2% upward over the past 30 days. The stock has gained 53.3% in the past year. AMX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: AMX
Vodafone Group: Based in the United Kingdom, Vodafone Group engages in telecommunication services in Europe and internationally. The company operates mobile and fixed networks in 21 countries and partners with mobile networks in 49 more. Its M-Pesa technology platform in Africa enables more than 48 million people to benefit from access to mobile payments and financial services. The company has about 315 million mobile customers, 28 million fixed broadband customers, and 22 million TV customers. It connects more than 123 million IoT devices. The consensus estimate for current-year earnings has been stable over the past 30 days. The stock, however, has lost 6.7% in the past year. VOD is a Zacks Rank #2 (Buy) stock.
Price and Consensus: VOD
TIM: Headquartered in Rio de Janeiro, TIM operates as a telecommunications company in Brazil. It develops fixed, mobile and cloud infrastructures and data centers and offers services and products for communications and entertainment. The Group comprises specialized factories that offer integrated digital solutions for citizens, businesses and public administrations. The company continues to execute at pace on its long-term growth strategy. The consensus estimate for current-year earnings has been revised upward by 6.9% over the past 30 days. The stock has appreciated 36.7% in the past year. TIMB carries a Zacks Rank #2.
Price and Consensus: TIMB
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3 Stocks to Watch From the Thriving Wireless Non-US Industry
Companies in the Zacks Wireless Non-US industry are benefiting from accelerated investments in network infrastructure, including the deployment of cutting-edge 5G technology. The industry participants are focused on providing high-quality and affordable services while expanding their customer base and identifying new revenue streams in a competitive market.
America Movil, S.A.B. de C.V. (AMX - Free Report) , Vodafone Group Public Limited Company (VOD - Free Report) and TIM S.A. (TIMB - Free Report) have significant growth opportunities offered by the deployment of advanced 4G LTE and 5G technology along with the wide proliferation of data traffic for the Internet of Things (IoT).
Industry Description
The Zacks Wireless Non-US industry comprises mobile telecommunications and broadband service providers based on foreign shores. These companies primarily offer voice services, including local, domestic and international calls, roaming services, and prepaid and postpaid. They provide value-added services, such as the IoT, comprising logistics and fleet management and automotive and health solutions. They also offer content streaming, interactive applications, wireless security services and mobile payment solutions. Some industry players sell mobile handsets and accessories through dealer networks and offer co-billing services to other telecommunications service providers. These firms provide IT solutions and cable and satellite pay television subscriptions as well as data services and hosting services to residential and corporate clients.
What's Shaping the Future of Wireless Non-US Industry
Deployment of Advanced 4G LTE & 5G: There has been an exponential growth of mobile broadband traffic and home Internet solutions driven by the work-from-home trend with an increase in user demand for coverage and speed. This has resulted in strong demand for innovative networking architecture as service providers aim to upgrade their networks to support the surge in data traffic. There is a continuous need for network tuning and optimization to maintain superior performance standards, creating demand for state-of-the-art wireless products and services. Moreover, a faster pace of 5G deployment worldwide is likely to propel the industry to newer heights. It is likely to augment the scalability, security and universal mobility of the telecom industry, which will propel the proliferation of IoT. Expansion of fiber optic networks by carriers to support their 4G LTE and 5G wireless standards are acting as tailwinds.
Aggressive Competition to Persist: Telecom services show a weak correlation to macroeconomic factors as these are deemed to be necessities. Wireless operators have been facing challenges due to the churn rate and 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. The companies follow an aggressive promotional strategy to increase penetration in the smartphone market. However, these efforts tend to affect profitability in the near term. Mobile phone operators also need to take measures to reduce costs and optimize business operations. Aggressive competition could limit their ability to attract and retain customers and affect operating and financial results.
Growing Demand for Superior Connectivity: In addition to delivering mission-critical communication services, the companies are taking steps to accelerate subscriber additions and improve churn management. They aim to offer an exceptional wireless experience to consumers and business customers by providing superior network connectivity. The wireless carriers are expanding their footprint while adopting unlimited plans to enhance average revenue per user. They are progressing on strategic objectives, growing customer base by increasing handset connections and customer loyalty to boost revenues and profitability. Furthermore, the industry participants are taking a holistic approach to content delivery. They are offering various pathways for delivering services through a combination of network-based video transcoding and compression technologies to offer IP video formats, live TV and streaming services.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Wireless Non-US industry, which has 13 constituent companies, is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #81, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong near-term 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 an outcome of a positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. Over the past 10 months, the industry’s earnings estimates for the current year and the next have increased 61.5% and 75.4%, respectively.
Before we present a few non-US wireless stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms Sector, Lags S&P 500
The Zacks Wireless Non-US industry has outperformed the broader Zacks Computer and Technology sector but lagged the S&P 500 composite in the past year.
The industry has gained 3.7% over this period compared with the S&P 500’s rise of 6.2%. Meanwhile, the sector has lost 9.6%.
One-Year Price Performance
Industry's Current Valuation
The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing wireless stocks. The industry currently has a trailing 12-month EV/EBITDA of 9.37X compared with the S&P 500’s 14.41X. It is also trading below the sector’s trailing 12-month EV/EBITDA of 12.56X.
Over the past five years, the industry has traded as high as 21.96X, as low as 3.85X, with a median of 9X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (Past Five Years)
3 Non-US Wireless Stocks to Watch
America Movil: Based in Mexico, America Movil provides telecommunication services in Latin America and globally. The company is working on developing alternatives to reap more benefits from its tower assets while increasing shareholders’ value and reducing debt. It offers customers a portfolio of value-added services and improved communications solutions in 25 countries in Latin America, the United States and Central and Eastern Europe. The company leveraged the investments it has made over the years in the latest technologies that enhanced the capacity and reach of its platforms, enabling it to handle significant traffic increases with no detriment to quality or speed. It is expected to benefit from a growing subscriber base and focused 5G efforts. The Zacks Consensus Estimate for its current-year earnings has been revised 14.2% upward over the past 30 days. The stock has gained 53.3% in the past year. AMX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: AMX
Vodafone Group: Based in the United Kingdom, Vodafone Group engages in telecommunication services in Europe and internationally. The company operates mobile and fixed networks in 21 countries and partners with mobile networks in 49 more. Its M-Pesa technology platform in Africa enables more than 48 million people to benefit from access to mobile payments and financial services. The company has about 315 million mobile customers, 28 million fixed broadband customers, and 22 million TV customers. It connects more than 123 million IoT devices. The consensus estimate for current-year earnings has been stable over the past 30 days. The stock, however, has lost 6.7% in the past year. VOD is a Zacks Rank #2 (Buy) stock.
Price and Consensus: VOD
TIM: Headquartered in Rio de Janeiro, TIM operates as a telecommunications company in Brazil. It develops fixed, mobile and cloud infrastructures and data centers and offers services and products for communications and entertainment. The Group comprises specialized factories that offer integrated digital solutions for citizens, businesses and public administrations. The company continues to execute at pace on its long-term growth strategy. The consensus estimate for current-year earnings has been revised upward by 6.9% over the past 30 days. The stock has appreciated 36.7% in the past year. TIMB carries a Zacks Rank #2.
Price and Consensus: TIMB