We recently published a list of the 13 Best Telecom Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Verizon Communications Inc. (NYSE:VZ) stands against other telecom stocks.
The global telecom services market is estimated at $1.98 trillion as of 2024, according to Grand View Research. It is projected to grow at a CAGR of 6.5% from 2025 to 2030. This expansion is driven by the increasing expenditures on 5G infrastructure deployment, which is fueled by a shift in customer preference towards next-generation technologies and smartphone devices. Additionally, the rising number of mobile subscribers, the soaring demand for high-speed data connectivity, and the growing need for value-added managed services are key factors that contribute to this market growth.
Initially a trend in 2019, 5G has solidified its position as a critical driver of the industrial economy. The Future of Commerce reported that the global 5G connections are projected to surge from 1.76 billion in 2023 to 7.9 billion by 2028. This indicates that 5G will constitute over half of all connections, as per reports from 5G Americas and Omdia. This expansion is driven by investments from government and telecom companies, as well as the demand for faster internet speeds, lower latency, and improved battery life. While 5G deployment continues, 6G is emerging and promises ultra-high data speeds via terahertz spectrum bands, low latency, and AI integration. It aims to revolutionize communication through applications like smart grids and immersive XR experiences. However, challenges like energy efficiency and responsible AI integration remain. Telecom companies stand to capture a $100 billion opportunity within the 5G economy.
AI is deeply ingrained in the telecom sector as well. It evolved from basic echo cancellation in the 1950s to sophisticated algorithms for network management and failure prediction. In 2025, AI’s role will intensify, with global telco investments projected to rise from $3.34 billion in 2024 to $58.7 billion by 2032. AI is crucial in network topology improvements. It facilitates self-healing networks, automated transitions, and AR applications. It will drive 6G’s evolution towards connected intelligence and enhance predictive maintenance, fault detection, security, and customer experiences through predictive and cognitive AI.
Our Methodology
We used the Finviz stock screener to compile an initial list of top telecom stocks. We then selected the 13 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) is a telecom leader that provides wireless and wireline services to consumers, businesses, and government entities. Operating through its Consumer and Business segments, it delivers advanced mobile connectivity, fiber-optic broadband, and enterprise solutions, which include IoT and security services.
In 2024, the company achieved a 3.1% year-over-year increase in wireless service revenue and added nearly 2.5 million postpaid mobility and broadband subscribers. Postpaid phone net additions reached nearly 900,000 for the year, with positive contributions from both consumer and business segments. In broadband, the company added nearly 1.6 million subscribers. This was driven largely by fixed wireless access (FWA), which now boasts over 4.6 million subscribers and generated $2.1 billion in revenue. The company is targeting 8 to 9 million FWA subscribers by 2028.
Through its Verizon AI Connect initiative, the company is using its extensive fiber and edge compute assets to provide high-capacity connectivity and computing solutions for AI applications. It’s collaborating with industry leaders like NVIDIA and Vultr with already secured customer contracts that indicate significant potential for this new business segment.
Third Point Management views the company’s acquisition of Frontier positively, as it has driven a beneficial revaluation of fiber networks and highlights the strategic value of high-end fiber infrastructure. It stated the following regarding Verizon Communications Inc. (NYSE:VZ) in its Q3 2024 investor letter:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”
Overall, VZ ranks 3rd on our list of the best telecom stocks to buy according to hedge funds. While we acknowledge the growth potential of VZ, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VZ 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.