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Telecom Stock Roundup: VIAV Buys Expandium, VZ Offers Live 5G Data Session & More

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The U.S. telecom stocks witnessed a relatively subdued uptrend in the past week as latent geopolitical tensions apparently robbed the steam out of the sector growth engine. While the Trump administration continued to put pressure on the communist nation by adding a fresh list of 24 China-based firms to the “Entity List”, TikTok owner ByteDance sued the U.S. government over the federal decision to ban its operations in the country. This further strained the estranged relationship between the two economic global powerhouses. Meanwhile, the Sino-U.S. negotiations related to the Phase One deal received a big boost as both countries agreed to carry forward their agreement. This, in turn, perhaps made the balancing act of the industry all the more difficult as it continued to tread on a tightrope fraught with several pitfalls.   

President Trump enforced strict restrictions against 24 Chinese companies, alleging their illicit role in developing artificial islands on the disputed China Sea. The U.S. government viewed such atrocious activities as provocative acts against the sovereignty of other nations involved within the region and aimed to deter them through stiff sanctions. This attracted censure from China, which viewed the sanctions as “completely unreasonable” and “violation of international law”, souring the acrimonious bilateral relationship. 

Meanwhile, TikTok has filed a legal suit challenging the government’s executive orders that prohibit any business transactions with it. While the social video app maker argued that it complies with all local rules and regulations while safeguarding American data privacy, the suit is likely to be a ploy to buy some time and seek leverage for a favorable takeover deal by Microsoft within the stipulated deadline of Sep 15.

Amid all this cacophony, high-level officials from both countries held a telephonic meeting to extend their bilateral trade ties related to the Phase One deal despite soaring tensions. The constructive dialogue focused on the various steps taken by China to execute structural changes for hassle-free functioning of American firms while ensuring greater protection for intellectual property rights and elimination of forced technology transfer. Both parties decided to continue creating a conducive atmosphere to carry forward their mutually agreed-upon trade deal notwithstanding their innate differences.     

Regarding company-specific news, acquisitions, 5G deployment, collaborations and earnings took the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1.     In a concerted effort to augment its virtualized solution portfolio, Viavi Solutions Inc. (VIAV - Free Report) has inked an agreement to acquire network monitoring solutions provider Expandium for an undisclosed amount. The buyout will enable Viavi to better serve the virtualization requirements of Tier-1 service providers across the globe.

The acquisition will enable Viavi to help carriers move away from proprietary hardware to software-defined services running on off-the-shelf servers, making it more dynamic and evolving according to the changing demand patterns. This, in turn, will help address the coronavirus-induced social-distancing norms by gradually replacing hardware-based solutions with containerized virtual machines.
 
2.     Verizon Communications Inc. (VZ - Free Report) announced the completion of the world’s first end-to-end fully virtualized 5G data session in a live network. The feat enables the telecom giant to respond to customers’ latency and computing needs by providing the base for mobile edge computing and network slicing.

The virtualization of the entire network from the core to the edge has been a multi-year redesign effort of Verizon’s network architecture. The move will likely drop the barrier for new vendors to enter the ecosystem.

3.     Ciena Corporation (CIEN - Free Report) recently joined forces with Infonas to establish a streamlined network infrastructure in the Middle East. Markedly, the company will capitalize on avant-garde Ciena Services and Hosted Manage, Control and Plan (“MCP”) services as part of the collaboration.

Ciena’s Hosted MCP service is a cloud-native platform that manages software upgrades and server administration. The solution provides hassle-free network ownership to customers and enables service providers to automate several operational aspects across packet network assets with utmost reliability.

4.      Ubiquiti Inc. (UI - Free Report) reported relatively healthy fourth-quarter fiscal 2020 results, with the bottom and top lines increasing year over year. However, although non-GAAP earnings surpassed the Zacks Consensus Estimate, revenues missed the same. Notably, the company recorded solid revenue growth despite supply-chain disruptions due to the coronavirus pandemic.

Non-GAAP net income came in at $93.2 million or $1.46 per share compared with $83.6 million or $1.19 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 33 cents. Quarterly revenues increased 10.1% year over year to $315.5 million, backed by higher sales of enterprise technology products. The top line, however, missed the consensus mark of $325 million. 

5.      CenturyLink, Inc. has teamed up with Bark Technologies, a leading content monitoring service that helps families manage their children’s digital lives. The move is aimed at advancing Bark’s online safety solutions to millions of subscribers as well as non-customers.

The companies are advocating for a secure Internet platform so that parents can have peace of mind when their children are online. Importantly, Bark’s screen time management and web filtering tools help parents set limits around how and when their kids should use devices.

Price Performance

The following table shows the price movement of some of the major telecom stocks over the past week and the six months.



In the past five trading days, Qualcomm has been the best performer with its stock rising 4.3%, while CenturyLink was the sole decliner with its stock declining 0.5%.

Over the past six months, Qualcomm has been the best performer with its stock appreciating 32.5%, while AT&T was the biggest decliner with its stock falling 17.4%.

Over the past six months, the Zacks Telecommunications Services industry gained 0.9%, while the S&P 500 rose 17.7%.



What’s Next in the Telecom Space?

In addition to the 5G deployments and product launches, all eyes will remain glued to how the administration continues to safeguard the interests of domestic telecom firms from Chinese threats.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>