In this article, we discuss the 8 best communication stocks to buy according to analysts along with the latest updates around the communications services industry.
The communication sector seems to be performing well through this year as the sector ETFs are slightly outperforming the broader market. While XLC and VOX are up over 25% year-to-date as of October 17, the S&P has gained slightly over 23%. Chris Grisanti, chief market strategist at MAI Capital Management also sees significant opportunities in the tech and communications sector despite him being a value investor.
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He told CNBC on October 17 that the economy appears to be in very strong shape, with positive earnings reports from financial companies. Economic indicators are looking solid, and the upcoming election could have a positive effect regardless of the outcome. Moving forward, the strongest earnings are likely to come from technology and communication stocks, despite them typically being outside value-focused investments.
Adapting to Consumer Behavior in Media and Telecom
According to PwC’s Media and Telecommunications: US Deals 2024 Midyear Outlook, media and telecommunications deal activity remained subdued due to high interest rates and uncertain regulations, with deal volumes declining despite a slight rebound in values in 1H 2024. Consumer preferences are shifting towards short-form, user-generated content platforms like TikTok, where influencers play a significant role in attracting brand partnerships. Streaming platforms are evolving through bundling and partnerships to manage rising content costs while improving subscriber retention.
AI, especially generative AI, is increasingly influencing content creation and ad tech, which are making campaigns more efficient and optimizing ad spending. Private equity investors are showing renewed interest, especially in consumer-focused deals, although regulatory obstacles and privacy concerns continue to complicate the market. As companies navigate these challenges, maintaining a strong consumer value proposition is crucial to retaining subscribers and driving growth.
With that, we look at the 8 Best Communication Stocks To Buy According to Analysts.
8 Best Communication Stocks To Buy According to Analysts
Our Methodology
For this article, we identified over 40 communications services stocks with a market cap above $10 billion through the Finviz stock screener. Next, we narrowed our list to 8 stocks most favored by analysts. We listed the stocks in ascending order of their average price target upside as of October 17. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Communication Stocks To Buy According to Analysts
8. Roblox Corporation (NYSE:RBLX)
Average Price Target Upside: 22.93%
Number of Hedge Fund Holders: 54
Roblox Corporation (NYSE:RBLX) offers a free platform where millions of users connect, create, and play. Its vision is to reimagine social connections in a safe, civil, and optimistic environment. The platform includes Roblox Client for exploring immersive 3D experiences, Roblox Studio for developers to create content, and Roblox Cloud, which supports the platform’s infrastructure.
Its growth is driven by user-generated content and social connections, with users inviting friends to join, which expands engagement. Its developer community, consisting of millions globally, creates experiences and items for users. Developers can earn through several monetization methods like in-experience purchases, avatar items, and ads. As of Q2, the platform has 79.5 daily active users, 17.4 billion engagement hours, 2.5 million developers, and 5.3 million active experiences.
Roblox (NYSE:RBLX) recently came under scrutiny after a report was released from Hindenburg Research. The report raised concerns about inflated user metrics and questionable financial reporting. However, on October 8, the company dismissed the claims made in the report and stressed its long-standing focus on safety and civility.
The company highlighted its substantial investments in Trust & Safety measures that ensure that millions of users have secure and positive experiences daily. The company also criticized the financial claims made by Hindenburg, calling them misleading and accusing the authors of having an agenda as short sellers.
The company pointed to its strong financial performance, including a 22% increase in bookings in Q2 2024 and significant cash flow. The company also defended its reporting methods for key metrics and noted that its disclosures about user activity and fraud prevention have been transparent and accurate. Roblox (NYSE:RBLX) looks forward to addressing further questions in its upcoming earnings call.
On October 9, The Fly reported that Piper Sandler raised the company’s price target from $48 to $54 and maintained an Overweight rating. After surveying 13,000 U.S. teens, the firm noted an increase in the platform’s active users. About 46% of teens are using Roblox, up from 34% in the spring and 31% last year. Usage also grew across all activity levels. Based on these findings, Piper increased its estimates for Roblox (NYSE:RBLX). It is the 8th best communication stock to buy according to analysts.
7. Alphabet Inc. (NASDAQ:GOOGL)
Average Price Target Upside: 25.82%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL), the parent company of Google, oversees a range of subsidiaries across multiple sectors, including health, venture capital, and autonomous driving, with Google remaining its largest and most recognizable entity. The company’s main focus is to organize global information and make it accessible through services like Google Search, YouTube, Google Assistant, and Google Cloud.
AI plays a key role in its offerings, with advancements such as the Gemini model introduced in 2023, which improve capabilities across various data types. Recently, in a memo, CEO Sundar Pichai announced that the Gemini app team will join Google DeepMind to work more closely on new models and improve their deployment. The Gemini app is how consumers access the latest Gemini models. Also, the assistant teams working on devices and home experiences will move to Platforms & Devices, bringing together efforts to improve AI-powered home products and user experience.
Alphabet (NASDAQ:GOOGL) is currently facing heightened antitrust scrutiny in the U.S., with the Justice Department considering the possibility of forcing the company to spin off certain services to address concerns about monopolistic practices in online search.
Despite that, Mizuho Securities analyst James Lee maintained a Buy rating on the company stock due to its strong fundamentals and optimistic outlook despite regulatory challenges. He acknowledged the Department of Justice’s proposed changes to Google’s search operations but believes these will not drastically weaken Google’s market position. Lee expects Alphabet (NASDAQ:GOOGL) to manage these regulatory adjustments well, with minimal impact on its overall operations, including search results and advertising.
Patient Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
6. Rogers Communications Inc. (NYSE:RCI)
Average Price Target Upside: 29.18%
Number of Hedge Fund Holders: 22
One of the best communication stocks, Rogers Communications Inc. (NYSE:RCI) is a Canadian telecommunications and media company with a wide-ranging presence in wireless communication, cable TV, and internet services. It operates one of Canada’s largest wireless networks and serves millions of customers nationwide. The company also holds significant stakes in television, radio, and sports, making it a major player in Canada’s media landscape.
As one of the leading wireless providers in Canada, it connects 11.7 million mobile subscribers across more than 2,200 communities through its expansive 5G network. The company also serves over 60% of Canadian households and offers reliable internet, innovative TV services like the Xfinity platform, and top-tier home security. It also delivers tailored connectivity solutions to more than 4 million businesses and supports both small and large enterprises.
On October 8, Rogers (NYSE:RCI) announced that starting January 1, 2025, it will exclusively host Warner Bros. Discovery’s suite of English-language U.S. lifestyle and factual channels in Canada. This move comes after Bell Media dropped its legal challenge to prevent Canadians from accessing Discovery channels.
As the exclusive distributor and advertising representative for Discovery brands in Canada, the company will launch channels like Discovery ID and Discovery, along with additional content from Cooking, OWN, MotorTrend, Animal Planet, and Discovery Science.
On September 18, Rogers (NYSE:RCI) announced it has agreed to purchase Bell’s 37.5% stake in Maple Leaf Sports & Entertainment (MLSE) for C$4.7 billion. The deal strengthens the company’s position in sports and entertainment, which are key components of its business strategy. Over the past decade, Rogers has invested C$14 billion in Canadian sports, and this purchase will further support its efforts to bring championships to the country.
The company’s financing plan ensures the deal won’t impact its debt levels, with private investors involved in the funding. The transaction will also secure long-term Canadian ownership of the MLSE teams. After the acquisition, Rogers (NYSE:RCI) will hold a controlling 75% stake in MLSE, expanding its sports portfolio, which includes ownership of the Toronto Blue Jays and Rogers Centre, as well as partnerships with other Canadian sports teams.
5. Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK)
Average Price Target Upside: 31.69%
Number of Hedge Fund Holders: 11
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), commonly known as Telkom Indonesia, is an Indonesian telecommunications conglomerate with a strong presence in the country’s telecommunication and digital service industries.
It operates through several business segments, including digital connectivity, digital platforms, and digital services, and has expanded its reach beyond traditional telecom offerings into areas such as cloud computing, artificial intelligence, cybersecurity, and digital entertainment.
Telkom Indonesia’s (NYSE:TLK) financial performance in the first half of 2024 shows solid growth, driven by its focus on digital services. Total revenues reached Rp57.166 trillion (Indonesian Rp 1 = US$ 0.000065), representing a 29.9% year-over-year increase. Digital business contributed Rp39.536 trillion, growing 4.9% year-over-year and accounting for 89.9% of mobile revenue.
It also completed its integration with IndiHome’s B2C segment, achieving Fixed-Mobile Convergence (FMC), which strengthened its market leadership in both fixed and mobile services. The customer base expanded to 159.9 million mobile users, while IndiHome B2C saw a significant boost in subscribers.
Telkom Indonesia (NYSE:TLK) also used significant Capex to improve digital infrastructure, including 4G and 5G BTS deployment and the construction of submarine cables and hyperscale data centers.
On October 11, Telkom Indonesia (NYSE:TLK) revealed that it is actively supporting Indonesia’s smart city trend and has covered over 500 cities and regencies. Its subsidiary, Telkomsel’s 4G service reaches 97% of the population with extensive network infrastructure. Collaboration with OTT and digital partners helps educate the public on future connectivity and content trends, aligning with the smart city movement. The company takes the 5th spot on our list of best communications spots.
4. Pinterest, Inc. (NYSE:PINS)
Average Price Target Upside: 33.58%
Number of Hedge Fund Holders: 61
The fourth best communication stock to buy on our list is Pinterest, Inc. (NYSE:PINS). It is a visual search platform where users discover, save, and act on ideas across several interests. The company has around 500 million active users globally and the platform is popular among women and Gen Z. It monetizes through ads, offering various formats like standard images, video, shopping, carousel, and interactive ads. Ads are served through an auction system, which are optimized for either brand awareness or conversions.
AI and machine learning improve ad delivery, which in turn, improve performance for advertisers. The platform also provides tools for campaign management and measurement and helps brands assess their ad effectiveness. The company’s advertising appeals to brands across multiple industries, offering custom solutions based on their goals.
Tipranks reported that on October 2, Wells Fargo analyst Ken Gawrelski reaffirmed his Buy rating on Pinterest (NYSE:PINS) due to several positive factors. He expects the company to achieve around 20% revenue growth, with the stock trading at a favorable valuation below 12 times the projected 2026 EBITDA. Gawrelski believes the company will surpass the upper end of its Q3 revenue guidance and beat consensus-adjusted EBITDA estimates, which show margin expansion. The analyst also views the company’s improvements in ad load and the release of the AI-driven Performance+ product.
The analyst expects steady Q4 growth and controlled expenses, with optimism that a housing market recovery will boost engagement.
Moreover, The Fly reported that KeyBanc analyst Justin Patterson raised Pinterest’s (NYSE:PINS) price target from $43 to $45, maintaining an Overweight rating. The firm expects stronger-than-expected Q3 revenue and profitability due to a solid ad market and favorable currency movements. Despite macro uncertainty and a shorter holiday season, KeyBanc expects Pinterest’s product cycles will support continued growth into 2025.
ClearBridge Mid Cap Strategy stated the following regarding Pinterest, Inc. (NYSE:PINS) in its Q3 2024 investor letter:
“Selection in the communication services sector also weighed on performance, primarily driven by a decline in Pinterest, Inc. (NYSE:PINS), which operates a social media platform where users can express their interests and discover ideas through images they “pin” to their pages. Having been a strong contributor in the first half of the year, the company gave back some of its gains as investors captured gains and an uptick in economic uncertainty pushed out spending by leading advertisers. We capitalized on this weakness to add to the position, as we believe that several of its internal initiatives to increase the monetization of its users and become a better value-added advertiser to its customers are coming to fruition.”
3. News Corporation (NASDAQ:NWSA)
Average Price Target Upside: 34.27%
Number of Hedge Fund Holders: 41
News Corporation (NASDAQ:NWSA) is a global media and information services company that provides a range of content and products through well-known brands like The Wall Street Journal, Barron’s, The Australian, and HarperCollins Publishers. The company operates in multiple sectors, including digital real estate, subscription video services, news, book publishing, and sports. It is one of the best communication stocks to buy according to analysts.
It distributes its content across multiple platforms, including websites, mobile apps, smart TVs, social media, and traditional media such as print, TV, and radio. The company focuses on high-quality content and innovation, using digital tools to offer personalized services and monetize its content through subscriptions, advertising, and licensing.
The company released its fiscal fourth quarter and FY 2024 earnings in August. News Corporation (NASDAQ:NWSA) reported that despite challenges from high interest rates, fiscal 2024 was its second-best year, with an 8% rise in profitability to $1.54 billion. At the earnings call, CEO Robert Thomson noted the company’s growth in areas like book publishing, Digital Real Estate Services, and Dow Jones. A key focus was the company’s partnership with OpenAI, which aims to shape the future of journalism through AI and emotional intelligence.
The company is still reviewing its strategic options including potential moves involving Foxtel, which has seen significant subscriber growth. Other segments also performed well, such as Dow Jones, which saw strong B2B growth, and HarperCollins, which had a 250% increase in sector EBITDA.
News Corporation (NASDAQ:NWSA) expects growth across its segments in fiscal 2025, with a continued focus on digital real estate and subscription services. It plans to improve revenue from complementary businesses and digital offerings.
2. Baidu, Inc. (NASDAQ:BIDU)
Average Price Target Upside: 40.33%
Number of Hedge Fund Holders: 42
Baidu, Inc. (NASDAQ:BIDU) is a Chinese tech company focused on AI, cloud computing, and internet services, with a strong presence in the search engine market. It has advanced AI with models like ERNIE Bot and ERNIE 4.0, which enhance its products. It takes the 2nd spot on our list of best communication stocks according to analysts.
It is also the parent company of iQIYI, an OTT streaming platform which is often called the “Netflix of China.” It generates revenue mainly through subscriptions, although advertising also plays a role. Despite strong competition in China’s streaming market, iQIYI remains a key player due to its brand recognition and large user base.
While Baidu’s (NASDAQ:BIDU) stock price performance has been underwhelming in the current year, it is a fundamentally strong company with strong growth potential. While its online advertising revenue is still weak, its AI Cloud business is growing rapidly, and its autonomous driving segment shows long-term growth potential.
Despite the the decline in search engine revenue, the company still holds over around 56% of the market share in China as of September according to GlobalStats stat counter.
Even though Baidu’s (NASDAQ:BIDU) stock is still in a downtrend, it shows signs of recovery. Despite its challenges, it remains undervalued with a forward price-to-earnings multiple of 8.22x, which shows a nearly 39% discount to its sector median.
1. NetEase, Inc. (NASDAQ:NTES)
Average Price Target Upside: 42.01%
Number of Hedge Fund Holders: 35
NetEase, Inc. (NASDAQ:NTES) is a provider of internet and gaming services, known for creating premium content. It operates a wide range of popular mobile and PC games, both in China and globally. It has one of the largest internal R&D teams for mobile, PC, and console games.
The company integrates culture and education into its games and aims to create a more engaging and informed world. In addition to gaming, it also has key subsidiaries including Youdao, an intelligent learning platform, Cloud Music, a popular online music service, and Yanxuan, its private label lifestyle brand.
NetEase (NASDAQ:NTES) new releases have been quite popular among the masses as the multiplayer game, Once Human, saw over 230,000 peak users on Steam, while Naraka: Bladepoint Mobile hit number three on the iOS grossing chart in the second quarter. Established titles like Fantasy Westward Journey also performed well, achieving record-high quarterly revenue.
The company continued to improve its gaming portfolio, with new updates to Justice Mobile and future releases like Where Winds Meet and Marvel Rivals. The company remains committed to expanding its global reach through partnerships and innovative content.
On October 14, NetEase (NASDAQ:NTES) announced Destiny: Rising, a free-to-play mobile sci-fi RPG shooter set within an alternate timeline of the Destiny universe, licensed by Bungie. This new game offers players a rich narrative set in the post-Dark Age era, with a variety of playable hero characters, dynamic gameplay modes, and a blend of single, co-op, and multiplayer experiences.
NetEase (NASDAQ:NTES) tops our list of best communications stocks to buy according to analysts. On October 7, The Fly reported that Macquarie raised its price target for the company from $120 to $125 while maintaining an Outperform rating. The firm expects more growth for China’s internet sector and noted that stock valuations are still at half of Q1 2023 levels despite improved fundamentals.
The firm highlighted that China’s economic policies and careful corporate strategies boost earnings potential for 2025. Macquarie also pointed out that local services, e-commerce, and travel sectors offer strong value at a discount.
The company is also one of the most profitable gaming stocks with a TTM net income of $4 billion and a 5-year net income CAGR of nearly 27%.
Polen Capital stated the following regarding NetEase, Inc. (NASDAQ:NTES) in its first quarter 2024 investor letter:
“NetEase, Inc. (NASDAQ:NTES) is one of the top players in China’s video game industry and saw decent revenue growth in 2023, particularly in its games division, with profit growth close to 20%. The stock also continues to recover after gaming restrictions announced last quarter in China were not nearly as bad as first feared.”
While we acknowledge the potential of NetEase, Inc. (NASDAQ:NTES) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NTES but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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