The telecom industry is expected to grow due to increased demand for high-speed internet, 5G technology, remote work, and virtual communication.
Therefore, it could be wise to own fundamentally strong telecom stocks América Móvil, S.A.B. de C.V. (AMX), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (TLK) and uCloudlink Group Inc. (UCL).
Rising spending on 5G infrastructure deployment, an increasing number of mobile subscribers, and soaring demand for high-speed data connectivity are all expected to fuel telecom market growth as next-generation technologies are adopted more widely. The 5G infrastructure market is predicted to reach $9.87 billion in 2024 and $69.01 billion by 2029, increasing at a CAGR of 47.5%.
This growth is driven by the need for faster and more reliable networks to support emerging technologies such as IoT, AI, and autonomous vehicles. The global AI in telecommunication market is projected to grow to $19.17 billion by 2030, expanding at a notable CAGR of 40.6%.
In addition, the global telecom market is predicted to grow at a CAGR of 5.8% to $3.90 trillion by 2028. Investors’ interest in telecom stocks is evident from the SPDR S&P Telecom ETF’s (XTL) 7.1% gains over the past three months and 4.7% gains over the past nine months.
Considering these conducive trends, let’s analyze the fundamentals of the three stocks from the Telecom - Foreign industry, beginning with the third choice.
Stock #3: América Móvil, S.A.B. de C.V. (AMX)
Based in Mexico, AMX provides telecommunications services in Latin America and internationally. The company offers wireless and fixed voice services, including local, domestic, and international long-distance services, and network interconnection services.
AMX’s trailing-12-month ROCE of 20.56% is 367.3% higher than the industry average of 4.40%. Its trailing-12-month net income margin of 9.33% is 157.7% higher than the industry average of 3.62%.
AMX’s total revenues came in at MXN200.71 billion ($11.76s billion) for the fourth quarter that ended December 31, 2023. Its EBIT and EBITDA amounted to MXN41.81 billion ($2.45 billion) and MXN78.27 billion ($4.59 billion). Its net income amounted to $18.06 billion ($1.06 billion).
Analysts expect AMX’s revenue to come in at $48.42 billion for the year ending December 2024, increase 2% year-over-year. Its EPS is expected to grow 12.6% year-over-year to $1.58 for the same period. It is expected to surpass EPS in three of four trailing quarters. The stock has gained 4.2% over the past three months to close the last trading session at $18.45.
AMX’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AMX has an A grade for Stability and a B for Sentiment and Quality. Within the A-rated Telecom - Foreign industry, it is ranked #14 out of 44 stocks. To see additional POWR Ratings for Growth, Value and Momentum for AMX, click here.
Stock #2: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (TLK)
Headquartered in Bandung, Indonesia, TLK provides information and communications technology, and telecommunications network services worldwide. The company operates through mobile; consumer; enterprise; Wholesale and International Business; and Other segments.
TLK’s trailing-12-month ROCE of 18.62% is 323.3% higher than the 4.40% industry average. Its trailing-12-month ROTA of 8.57% is 441.3% higher than the 1.58% industry average.
TLK’s revenues for the nine months ended September 30, 2023, increased 2.2% year-over-year to Rp111.24 trillion ($7.12 billion). Its operating income increased 10.8% over the prior year quarter to Rp34.98 trillion ($2.24 billion). The company’s profit for the period increased 11.3% year-over-year to Rp25.39 trillion ($1.62 billion). Also, its EPS came in at Rp196.84, representing an increase of 17.6% year-over-year.
TLK’s revenue is expected to come in at $9.82 billion for the year ending December 2024 up 2.5% year-over-year. Its EPS is expected to grow 5.1% year-over-year to $1.78 for the same period. Over the past three months, the stock has gained 14.8% to close the last trading session at $26.76.
It’s no surprise that TLK has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Stability and Quality. It is ranked #13 in the same industry.
Beyond what is stated above, we’ve also rated TLK for Growth, Value, Sentiment and Momentum. Get all TLK ratings here.
Stock #1: uCloudlink Group Inc. (UCL)
Headquartered in Tsim Sha Tsui, Hong Kong, UCL operates as a mobile data traffic sharing marketplace in the telecommunications industry.
UCL’s trailing-12-month ROTC of 59.94% is significantly higher than the industry average of 3.76%. Its trailing-12-month ROCE of 25.11% is 470.9% higher than the industry average of 4.40%.
For the third quarter that ended September 30, 2023, UCL reported revenues of $23.87 million, up 31% year-over-year. The company’s gross profit increased 40.6% year-over-year to $12.21 million. Its net income stood at $3.49 million, compared to net loss of $4.60 million for the same period.
Street expects UCL’s revenue to come in at $106.45 million for the year ending December 2024, up 21.8% year-over-year. Its EPS is expected to grow 73.7% year-over-year to $0.33 for the same period. It is expected to surpass EPS in three of four trailing quarters. Shares of UCL have gained 20.9% over the past month to close the last trading session at $1.77.
UCL has an overall B rating, equating to a Buy in our POWR Ratings system.
UCL’s is ranked #6 in the same industry. It has an A grade for Growth and Sentiment and a B for Quality. To see additional UCL’s ratings for Value, Momentum and Stability, click here.
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AMX shares were trading at $18.65 per share on Wednesday morning, up $0.20 (+1.08%). Year-to-date, AMX has gained 0.70%, versus a 4.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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