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3 Wireless Stocks Likely to Thrive Against Industry Shortcomings
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The Zacks Wireless National industry appears to be combating high capital expenditures for infrastructure upgrades, tariff uncertainty, supply-chain disruptions due to the prolonged Russia-Ukraine war, Middle East tensions and high customer inventory levels. However, the industry is likely to benefit in the long run from a fast-track 5G deployment and extensive fiber densification.
Amid this backdrop, Cogent Communications Holdings, Inc. (CCOI - Free Report) , ATN International, Inc. (ATNI - Free Report) and Cambium Networks Corporation (CMBM - Free Report) are likely to gain from higher demand for scalable infrastructure for sustainable networks with a wide proliferation of the Internet of Things (IoT), wireless traction and solid broadband momentum.
Industry Description
The Zacks Wireless National industry primarily comprises firms 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 and 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 where required and are most effective, whether in the cloud, the network, or on their premises.
What's Shaping the Future of the Wireless National Industry?
Disruptive Raw Material Prices: High raw material prices due to Middle East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have adversely impacted the operational schedules of various firms. In addition, the imposition of tariffs and reciprocal tariffs has affected the supply chain mechanism. The demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices. Wireless operators face challenges due to 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. Aggressive competition is likely to limit the ability to attract and retain customers, affecting operating and financial results.
Booming 5G & Fiber Ecosystem: 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. 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. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.
Eroding Legacy Services: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers are eroding profits. A steady decline in linear TV subscribers and legacy services due to a challenging macroeconomic environment and high inflation adds to the margin woes. Consequently, the industry firms are increasingly seeking diversification from legacy telecom services to more business, enterprise and wholesale opportunities. 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, which is affecting their profitability.
Zacks Industry Rank Indicates Grim Prospects
The Zacks Wireless National industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #160, which places it in the bottom 34% 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 bleak prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
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 Lags S&P 500, Sector
The Zacks Wireless National industry has underperformed the S&P 500 composite and the broader Zacks Computer and Technology sector over the past year.
The industry has declined 3.3% over this period against the S&P 500 and the sector’s growth of 13.2% and 23.9%, 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 9.08X compared with the S&P 500’s 17.91X. It is also below the sector’s trailing 12-month EV/EBITDA of 18.66X.
Over the past five years, the industry has traded as high as 9.67X, as low as 6.34X and at the median of 7.49X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
3 Wireless National Stocks to Keep a Close Eye on
Cogent: Headquartered in Washington, DC, Cogent is a Tier 1 Internet Service Provider (ISP) that offers low-cost, high-speed Internet access, private network services and colocation center services with ultra-low latency data transmission. It addresses the dynamic needs of various small and medium-sized businesses, ISPs and other bandwidth-intensive organizations across the globe. The company offers state-of-the-art colocation data center services that provide constant power supply and backup generators, making it ideal for disaster recovery and data backup. Its data centers provide a conducive environment for coherent connectivity, security, availability and performance to its end customers. High-speed bandwidth and dedicated Internet access remain its highest priority, backed by a team of committed customer support and local provisioning teams to clinch maximum reliability. The stock delivered an earnings surprise of 4%, on average, in the trailing four quarters. Cogent currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CCOI
ATN International: Headquartered in Beverly, MA, ATN International offers digital infrastructure and communications services with a focus on rural and remote markets. The company is progressing steadily with its “Glass-and-Steel” network expansion strategy and is gradually moving away from the legacy wireless wholesale business. The acquisition of Sacred Wind Enterprises by Commnet Broadband, which is a wholly owned subsidiary of ATN International, has extended its regional footprint with a complementary portfolio. It aims to focus more on the rural markets to augment its leading position with support from government stimulus programs for broadband deployment in underserved areas. The Zacks Consensus Estimate for its current-year earnings has been revised 68.8% upward over the past year, while that for the next year is up 500%. ATN International has a long-term earnings growth expectation of 10%. This Zacks Rank #2 (Buy) stock has a VGM Score of A.
Price and Consensus: ATNI
Cambium: Headquartered in Rolling Meadows, IL, Cambium operates as a wireless solutions provider, connecting people with a flexible network infrastructure. Backed by dynamic business fundamentals, the company has 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 company is well-positioned to benefit from a proprietary software and product ramp-up, likely enabling it to deliver a compelling combination of price, performance and spectrum efficiency. One of the major advantages of Cambium is its fixed wireless broadband networking infrastructure solutions, which are distinguished by embedded intelligence and scalability. The Zacks Consensus Estimate for its current-year earnings has been revised 40% upward over the past year. This Zacks Rank #2 stock has gained 142.2% in the past year. Cambium has a VGM Score of B.
Price and Consensus: CMBM
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3 Wireless Stocks Likely to Thrive Against Industry Shortcomings
The Zacks Wireless National industry appears to be combating high capital expenditures for infrastructure upgrades, tariff uncertainty, supply-chain disruptions due to the prolonged Russia-Ukraine war, Middle East tensions and high customer inventory levels. However, the industry is likely to benefit in the long run from a fast-track 5G deployment and extensive fiber densification.
Amid this backdrop, Cogent Communications Holdings, Inc. (CCOI - Free Report) , ATN International, Inc. (ATNI - Free Report) and Cambium Networks Corporation (CMBM - Free Report) are likely to gain from higher demand for scalable infrastructure for sustainable networks with a wide proliferation of the Internet of Things (IoT), wireless traction and solid broadband momentum.
Industry Description
The Zacks Wireless National industry primarily comprises firms 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 and 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 where required and are most effective, whether in the cloud, the network, or on their premises.
What's Shaping the Future of the Wireless National Industry?
Disruptive Raw Material Prices: High raw material prices due to Middle East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have adversely impacted the operational schedules of various firms. In addition, the imposition of tariffs and reciprocal tariffs has affected the supply chain mechanism. The demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices. Wireless operators face challenges due to 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. Aggressive competition is likely to limit the ability to attract and retain customers, affecting operating and financial results.
Booming 5G & Fiber Ecosystem: 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. 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. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.
Eroding Legacy Services: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers are eroding profits. A steady decline in linear TV subscribers and legacy services due to a challenging macroeconomic environment and high inflation adds to the margin woes. Consequently, the industry firms are increasingly seeking diversification from legacy telecom services to more business, enterprise and wholesale opportunities. 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, which is affecting their profitability.
Zacks Industry Rank Indicates Grim Prospects
The Zacks Wireless National industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #160, which places it in the bottom 34% 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 bleak prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
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 Lags S&P 500, Sector
The Zacks Wireless National industry has underperformed the S&P 500 composite and the broader Zacks Computer and Technology sector over the past year.
The industry has declined 3.3% over this period against the S&P 500 and the sector’s growth of 13.2% and 23.9%, 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 9.08X compared with the S&P 500’s 17.91X. It is also below the sector’s trailing 12-month EV/EBITDA of 18.66X.
Over the past five years, the industry has traded as high as 9.67X, as low as 6.34X and at the median of 7.49X, as the chart below shows.
Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
3 Wireless National Stocks to Keep a Close Eye on
Cogent: Headquartered in Washington, DC, Cogent is a Tier 1 Internet Service Provider (ISP) that offers low-cost, high-speed Internet access, private network services and colocation center services with ultra-low latency data transmission. It addresses the dynamic needs of various small and medium-sized businesses, ISPs and other bandwidth-intensive organizations across the globe. The company offers state-of-the-art colocation data center services that provide constant power supply and backup generators, making it ideal for disaster recovery and data backup. Its data centers provide a conducive environment for coherent connectivity, security, availability and performance to its end customers. High-speed bandwidth and dedicated Internet access remain its highest priority, backed by a team of committed customer support and local provisioning teams to clinch maximum reliability. The stock delivered an earnings surprise of 4%, on average, in the trailing four quarters. Cogent currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CCOI
ATN International: Headquartered in Beverly, MA, ATN International offers digital infrastructure and communications services with a focus on rural and remote markets. The company is progressing steadily with its “Glass-and-Steel” network expansion strategy and is gradually moving away from the legacy wireless wholesale business. The acquisition of Sacred Wind Enterprises by Commnet Broadband, which is a wholly owned subsidiary of ATN International, has extended its regional footprint with a complementary portfolio. It aims to focus more on the rural markets to augment its leading position with support from government stimulus programs for broadband deployment in underserved areas. The Zacks Consensus Estimate for its current-year earnings has been revised 68.8% upward over the past year, while that for the next year is up 500%. ATN International has a long-term earnings growth expectation of 10%. This Zacks Rank #2 (Buy) stock has a VGM Score of A.
Price and Consensus: ATNI
Cambium: Headquartered in Rolling Meadows, IL, Cambium operates as a wireless solutions provider, connecting people with a flexible network infrastructure. Backed by dynamic business fundamentals, the company has 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 company is well-positioned to benefit from a proprietary software and product ramp-up, likely enabling it to deliver a compelling combination of price, performance and spectrum efficiency. One of the major advantages of Cambium is its fixed wireless broadband networking infrastructure solutions, which are distinguished by embedded intelligence and scalability. The Zacks Consensus Estimate for its current-year earnings has been revised 40% upward over the past year. This Zacks Rank #2 stock has gained 142.2% in the past year. Cambium has a VGM Score of B.
Price and Consensus: CMBM