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The communications scene is home to some intriguing companies, many of which boast fairly reasonable valuations at this point in the bull market. Undoubtedly, the communications scene entails a high degree of spending. In a falling-rate environment, such heavy spenders may catch more of a break. In any case, the following firms — TMUS, T, and AMZN (even though AMZN may not seem like a communications play at first) — seem worth checking out while the analyst community views them as Strong Buys.
Therefore,
let’s check in with TipRanks’ Comparison Tool to get a better gauge of which stock may be the best bet for the long haul.
T-Mobile (
NASDAQ:TMUS)
Many legacy telecom firms fumbled the ball in a big way many years ago, allowing T-Mobile to not only grab the ball but sprint at explosive speed toward the endzone. Today, TMUS stock is pretty much the go-to telecom stock to own if you seek steady gains. Over the past 10 and five years,
shares have soared over 380% and 112%, respectively.
Though the momentum has slowed in recent years, with a bit more volatility (shares lost almost 33% from peak to trough of their value in the back half of 2021), I still view T-Mobile as a winner with the means to keep on taking share and powering growth. As such, I’m staying bullish, even if the pace of gains has slowed a bit.
It’s not just heavy investment in an enviable 5G wireless infrastructure that’s given T-Mobile the edge over rivals, but the firm has also not been afraid to undercut rivals. Whether it’s through aggressive promotions or new plan “types,” T-Mobile certainly stands out as an aggressor in a market of firms that seemingly only know how to play defense.
Recently, T-Mobile unveiled its “Flex” plans, which include a “free” phone for subscribers, among other perks. The plans are also pretty affordable, starting at $50 per month for unlimited 5G data, talk, text, a robocall-blocking service (goodbye annoying spam calls), and a very generous 100GB in cloud storage space courtesy of Alphabet’s (
NASDAQ:GOOGL
) (
NASDAQ:GOOG
) Google One.
If that sounds like a deal too good to pass up, that’s because it is, especially in an uncertain economic landscape with many consumers still “hungover” from inflation. At this pace, it seems like TMUS stock is bound to pick up momentum as the company gains more market share while holding onto the share it already has.
Its first-quarter results saw T-Mobile add 532,000 postpaid customers, topping rivals but coming in line with the additions enjoyed in the same quarter a year prior. With the new Flex plan, count me as unsurprised if additions get a big jolt.
What Is the Price Target of TMUS Stock?
TMUS stock is a Strong Buy, according to analysts, with 15 unanimous Buys assigned in the past three months. The
average TMUS stock price target of $188.15 implies 13.7% upside potential.
AT&T (
NYSE:T)
AT&T is one of the laggards in the telecom scene, as it’s struggling to catch up to the top dog, T-Mobile. Despite the multi-year slump, the main draw to AT&T stock is the
nice dividend (6.33% yield) and the potentially “deep” value to be had in shares. At 7.8 times forward price-to-earnings (P/E), T stock goes for far less than T-Mobile, which boasts an 18.3 times forward P/E at writing. And though T-Mobile recently announced a dividend (current yield of 1.6%), it represents just a fraction of AT&T’s dividend yield.
Personally, I’d much rather be in the market leader that’s taking share than a firm that’s undergoing a massive transformation where success is no guarantee. As such, I’m neutral on the stock, though I am enticed by its
recent deal with satellite network firm AST SpaceMobile (
NASDAQ:ASTS
), which could put the legacy telecom firm on the cutting edge of tech again with “space-based direct-to-mobile technology.”
Could satellite connectivity be the next frontier for the telecoms? It could be. And it could represent an opportunity for AT&T to hit back at T-Mobile. By investing wisely, AT&T could attract and retain remote consumers who rely on satellite for a decent internet connection.
In any case, it’s too hard to tell when AT&T’s AST SpaceMobile deal will pay off. It could be many years if not more than a decade. Though less material over the medium term, I view it as an encouraging sign of where AT&T could be looking for next-generation growth.
What Is the Price Target of T Stock?
T stock is a Strong Buy, according to analysts, with nine Buys and one Hold assigned in the past three months. The
average T stock price target of $21.25 implies 21.4% upside potential.
Amazon (
NASDAQ:AMZN)
Amazon is an e-commerce and cloud-computing firm that has a hand in many pies, from groceries (think Whole Foods) to video streaming (Prime Video) and even gamer-focused social media (Twitch). The communications scene is just another market that Amazon could look to make a lateral move into as it expands its many service segments.
Call Amazon a digital retailer or cloud service provider, if you will. However, it can pay dividends (not literally) to view the firm as more of a market disruptor that’s not satisfied unless it’s disrupting new markets to fuel its growth profile. Given its ability to sustain growth by targeting new markets, I have to stay bullish even with new all-time highs in sight.
On the surface, Amazon doesn’t seem to have all that much exposure to communications, at least compared to other media and telecom pure-plays. Digging deeper, though, it becomes more apparent that Amazon is an influential force in the communications scene. In fact, I’d argue that the communications landscape is ripe for disruption and could become a serious growth market for Amazon in the distant future.
Live-streaming platform Twitch and audiobook platform Audible are just two “media” businesses that the firm can build off of in a big way. Such businesses represent a sliver of the overall Amazon pie today, but perhaps they could be part of a budding communications segment at some point down the road, especially as AI is thrown into the mix.
Additionally, Amazon’s more experimental projects may just put the telecom scene on notice a decade or more from now. Specifically,
Amazon’s Project Kuiper, which is shooting to construct a broadband internet network of 3,236 satellites, could be a development to watch closely as Elon Musk’s satellite internet firm Starlink shows signs of early success. For Amazon, Project Kuiper represents a potential threat to traditional telecoms in the future.
With AMZN stock going for just north of 40 times forward P/E, I not only think such a project is not being baked in to the valuation, but the full potential of its AI-enabled cloud business may not be as well.
What Is the Price Target for AMZN Stock?
AMZN stock is a Strong Buy, according to analysts, with 42 unanimous Buys assigned in the past three months. The
average AMZN stock price target of $220.60 implies 20.5% upside potential.
The Takeaway
Analysts hold communications stocks in high regard these days. The competitive landscape may be fierce, but with next-generation innovation (think 6G, satellite connectivity, and beyond) and potentially lower rates thrown in, I view the communications market as intriguing. Of the trio, analysts see the most upside in T stock for the year ahead.
Disclosure
Tech stocks rose late Wednesday afternoon with the Technology Select Sector SPDR Fund (XLK) rising 0.1% and the SPDR S&P Semiconductor ETF (XSD) climbing 1.8%.