Digitalization holds the key to growth of businesses, be it brick-and-mortar or purely web-based. This is why technology giants are rushing to bring the majority of the world’s population together through Internet connectivity.
Big techs such as Facebook, Inc. (FB - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Alphabet Inc. (GOOGL - Free Report) have been scaling up their efforts to provide Internet services around the world, particularly to rural and remote areas.
Let us thus take a look at some of these projects and note which companies may benefit from the expansion of Internet connectivity.
Facebook’s Massive Undersea CablesAroundAfrica
The social media giant is building a huge underwater cable around Africa, in order to bring Internet connectivity to the continent’s 1.3 billion inhabitants.Facebook has partnered with companies such as China Mobile, South Africa’s MTN, France’s Orange and Britain’s Vodafone along with local network operators on the project, dubbed 2Africa, per a CNBC report.
The company has given the responsibility of building the subsea cable to Nokia-owned cable systems provider Alcatel Submarine Networks. The cable is expected to be 37,000 kilometers or about 22,991 miles long. The cable will connect 23 countries in Africa, the Middle East and Europe, Facebook said.
Alphabet’s Loon and Equiano
Alphabet’s project for providing Internet services to remote and rural areas could be just a few weeks away from launching its first commercial service in Kenya. Project Loon, which uses high-altitude balloons to offer Internet connectivity, has been tested extensively by the company. The project is part of the company’s many “moonshot” projects that are moving toward providing real commercial services.
Another project by Alphabet’s Google is building a new subsea cable called Equiano to connect Africa with Europe, since it boosts its cloud computing infrastructure. Equiano is Google’s third private international cable. According to the search engine giant, Equiano will be the first subsea cable to integrate optical switching at the fiber-pair levelinstead of the traditional approach of wavelength-level switching.
Google said that a contract to build the subsea cable with Alcatel Submarine Networks was signed in fourth-quarter 2018. The first phase of the project, which connects South Africa with Portugal, is expected to be completed in 2021.
Amazon’s Satellites for Low-Cost Internet Connectivity
Amazon is looking toward a space-based web service. The company’s Project Kuiper plans to launch more than 3200 satellites into space to offer low-cost Internet services around the globe.
In fact, Amazon is one of the key players in a bankruptcy bidding game for the assets of the OneWeb satellite venture. OneWeb has 74 satellites launched into orbit to prepare for providing high-speed Internet service, starting in the Arctic and then going around the world. In March 2020, the company filed for bankruptcy when Japan’s SoftBank Group, a major backer, withdrew its funding because of the coronavirus pandemic.
Should Amazon manage to secure the satellite venture, it would certainly have an edge over other companies in the arena of offering Internet services.
Digital Population as of the End of April 2020
According to a report by Statista, the number of active Internet users as of the end of April 2020 was 4.57 billion, accounting for 59% of the global population. Speaking in terms of countries, China, India and the United States led the way with the highest number of Internet users.
3 Stocks to Buy
We have hand-picked three stocks that could gain significantly from the aforementioned Internet projects. All of these stocks carry a Zacks Rank #2 (Buy) and have gained since the beginning of this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Services of Netflix, Inc. (NFLX - Free Report) are in high demand around the world, owing to its streaming shows and unique content. Increased Internet access could further boost the stock. Shares of the company, which belongs to the Zacks Broadcast Radio and Television industry, have gained 36.6% so far this year against the industry’s decline of 0.2%.
Netflix’s expected earnings growth rate for the current year is 55.9%. The Zacks Consensus Estimate for the company’s current-year earnings has moved 6.3% north in the past 60 days.
Activision Blizzard, Inc. (ATVI - Free Report) is a developer of video games for mobile, PC and console. Shares of Activision Blizzard, which belongs to the Zacks Toys - Games - Hobbies industry, have gained 22.8% so far this year compared with the industry’s rise of 6.8%.
Activision Blizzard’s expected earnings growth rate for the current year is 18.7%. The Zacks Consensus Estimate for the company’s current-year earnings has moved 7.7% north in the past 60 days.
Shares of Microsoft Corporation (MSFT - Free Report) , which belongs to the Zacks Computer - Software industry, have gained 14.5% so far this year compared with the industry’s rise of 7%.
Microsoft’s expected earnings growth rate for the current year is 19.8%. The Zacks Consensus Estimate for the company’s current-year earnings has moved 1.2% north in the past 60 days.
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