We recently compiled a list of the 10 Best Telecom Stocks To Buy Right Now. In this article, we are going to take a look at where Comcast Corporation (NASDAQ:CMCSA) stands against the other telecom stocks.
The telecommunications industry is at a critical juncture as it navigates an era of rapid technological advancement and escalating data demands. Over the coming years, global data consumption is expected to surge dramatically, nearly tripling from 3.4 million petabytes (PB) in 2022 to 9.7 million PB by 2027. This massive increase is driven largely by the growing consumption of video content, which will account for approximately 79% of this data. Despite this exponential rise in data usage, telcos face a challenging financial landscape. Revenue growth from internet access is projected to remain modest, with a compound annual growth rate (CAGR) of only 4%, reaching $921.6 billion by 2027. This slow revenue growth contrasts with the substantial capital required for network upgrades and expansions.
According to PWC report “Perspectives from the Global Telecom Outlook 2023–2027”, to meet the rising data demand and stay competitive, telecommunications companies will need to invest heavily in infrastructure. The ongoing transition to 5G technology and the deployment of other advanced network standards will drive significant expenditures. By 2027, telcos are expected to invest around $342.1 billion in network enhancements. This includes the expansion of fibre networks and the adoption of Open Radio Access Networks (Open RAN), which aim to improve interoperability among devices and providers.
In response to these evolving demands, telcos are increasingly focusing on diversifying their service offerings beyond traditional connectivity. The Internet of Things (IoT) represents a major growth opportunity, with expectations for a substantial rise in connected devices. The number of IoT devices is projected to increase from 16.4 billion in 2022 to 25.1 billion by 2027. This growth will be driven by innovations in various sectors, including healthcare, where medical IoT devices are anticipated to double, reflecting a CAGR of 16.7%. The expansion of private 5G networks and edge computing services will further enhance the capabilities of telcos to meet the diverse needs of their business customers.
The shift towards advanced technologies like 5G presents both opportunities and challenges. The initial wave of capital expenditures on 5G infrastructure is nearing its peak, with future investments likely to focus on optimizing and scaling existing networks rather than extensive new deployments. This trend is expected to impact the financial strategies of telecom companies, as they will need to manage substantial investments while also seeking efficiencies and cost control. The growth in capital expenditure for 5G and fibre infrastructure will be accompanied by a rising focus on operational efficiency and monetization strategies.
In addition to network enhancements, telcos will need to foster collaboration across the broader ecosystem to thrive in this evolving landscape. Partnerships with technology providers, cloud services, and other stakeholders will be crucial for developing and delivering advanced services. Companies that excel in integrating these diverse technologies and creating seamless solutions will be better positioned to capture emerging opportunities in areas such as private networks and digital infrastructure.
The telecom industry is entering a period of significant transformation, characterized by rapid technological advancements and evolving consumer demands. To succeed, telcos must navigate the complex challenges of heavy investment requirements while exploring new growth avenues. Strategic partnerships, operational efficiency, and a focus on innovative technologies will be essential for companies aiming to excel in this competitive and dynamic environment.
Our Methodology
We used telecom sector ETFs plus online rankings to compile an initial list of the best telecom stocks to buy now. We narrowed our list to the 10 stocks that analysts see the most upside to. The list is sorted in ascending order of analysts’ average upside potential, as of August 13. Note: We only included companies whose primary business is in the telecom industry.
At Insider Monkey we are obsessed with 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).
A couple watching their favorite show on TV, enjoying the entertainment network service.
Comcast Corporation (NASDAQ:CMCSA)
Average Analyst Share Price Target Upside: 17.72%
Average Analyst Share Price Target: $45.78
Comcast Corporation (NASDAQ:CMCSA), a prominent media and entertainment conglomerate, operates across cable, broadcasting, film, streaming, live entertainment, and theme parks. With a market capitalization of $150 billion, Comcast Corporation (NASDAQ:CMCSA) is a major player in the industry. Despite the decline in cable TV, Comcast is thriving through its diversified assets, including the Peacock streaming service and broadband connectivity. Comcast Corporation (NASDAQ:CMCSA) is projected to rise by 17.72% to an average analyst target of $45.78, signaling optimistic growth expectations despite current challenges. For the latest quarter ending July 23, the company reported a normalized EPS of $1.21, exceeding forecasts by $0.09. Revenue of $29.69 billion fell short of expectations by $332.68 million, reflecting challenges in meeting top-line targets despite solid earnings performance. The company’s forward dividend yield is 3.17%, with an annual payout of $1.24 and a payout ratio of 28.78%. Over the past five years, dividends have grown at an average rate of 8.45%, and the dividend has been increased for six consecutive years. The most recent dividend of $0.31 will be paid on October 23, with an ex-dividend date set for October 2.
ClearBridge Small Cap Strategy made the following comment about Extreme Networks, Inc. (NASDAQ:EXTR) in its Q4 2022 investor letter:
“Stock selection in the information technology (IT) sector was the leading contributor to relative outperformance in the fourth quarter, benefiting from strong idiosyncratic drivers that helped our holdings overcome increased economic uncertainty. Extreme Networks, Inc. (NASDAQ:EXTR), one of the Strategy’s top-performing holdings, provides networking solutions worldwide through wired and wireless network infrastructure equipment and software development for network management, policy, analytics, security, and access controls. The company continues to exceed expectations thanks to its progress in consolidating its multiple offerings within a single platform and higher recurring software sales. As a result, the company has been able to accelerate its revenue growth and improve its profitability to the benefit of shareholders.”
Overall CMCSA ranks 3rd on our list of the best telecom stocks to buy. While we acknowledge the potential for CMCSA as an investment, our conviction lies in the belief that some 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 CMCSA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.