We recently compiled a list of the 10 Best Communication and Media 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 the other communication and media stocks.
The global telecommunications industry faces significant growth challenges amidst increasing demand for its essential services. Driven primarily by video traffic, global data consumption across telecom networks is expected to nearly triple by 2027. However, providers are experiencing limited pricing power in commoditized connectivity and data services, with internet access revenues projected to grow modestly at a 4% compound annual growth rate (CAGR) to reach $921.6 billion by 2027. Meanwhile, telecommunications companies (telcos) face substantial costs as they invest heavily in infrastructure to support 5G and other emerging technologies, with an estimated $342.1 billion investment forecasted for 2027 alone. These insights are highlighted in PwC’s inaugural Global Telecom Outlook, which underscores the strategic imperatives for telcos to sustain growth in a competitive landscape. Alongside traditional cost-cutting and optimization efforts, telcos are advised to explore growth opportunities such as IoT solutions, private 5G networks for businesses, fixed wireless broadband for households, and tailored digital infrastructure services for sectors like entertainment, healthcare, manufacturing, and mobility. Embracing these growth areas requires telcos to collaborate effectively within broader ecosystems that are reshaping the industry.
In the business-to-consumer (B2C) sector, telecommunications companies (telcos) are experiencing heightened demand driven by evolving user preferences, particularly as new devices with increasingly data-intensive requirements emerge, largely fueled by video content. By 2027, of the projected 9.7 million petabytes (PB) of data consumption, nearly 7.7 million PB (79%) will be attributed to digitized video content, surpassing all other categories combined. Over the same period, data consumption from traditional communications has grown 104% from 2018 to 2022 due in part to pandemic-related factors, but is expected to increase only 26.8% through 2027. Games represent another significant growth area, with data consumption associated with gaming projected to grow at a 21% compound annual growth rate (CAGR) from 2022 to 2027, driven by the shift towards online and cloud gaming. Virtual reality (VR), fueled by the expansion of the metaverse, is also on the rise, with an anticipated 43% CAGR in VR data consumption over the next five years, accounting for 5% of total data consumption by 2027.
Despite technological advancements and increasing competition, the price of data is declining, impacting internet access revenues which are expected to grow at a modest 4% CAGR to reach $921.6 billion by 2027 from $757.7 billion in 2022, closely tracking global GDP growth. Cellular data is forecasted to be the fastest-growing category, with a 27% CAGR from 2022 to 2027, driven by significant variations in data consumption patterns across regions. In North America, cellular data is projected to comprise 6% of all data traffic, compared to 30% in Asia, particularly influenced by developments in India where the rollout of 5G is expected to catalyze service innovation and subscriber growth, potentially reaching 300 million to 350 million 5G subscribers by 2026. Telecom giants such as Reliance Jio and Bharti Airtel are poised to capitalize on this opportunity by fostering a robust gaming ecosystem and expanding into sectors like healthcare.
Our Methodology
We leveraged Insider Monkey’s comprehensive database of 920 prominent hedge funds to identify the top 10 media and communications stocks with the highest level of hedge fund investment as of Q1 2024. These stocks are listed in order of increasing hedge fund ownership, providing insight into the most popular communication and media stocks among elite investors.
A smiling customer receiving customer contact center solutions on their smartphone.
Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 67
Verizon Communications Inc. (NYSE:VZ) announced on June 26 that it is introducing new programs and benefits to enhance customer options and business momentum. They’re refreshing their brand to reflect modern energy and vibrancy, rolling out across consumer, business, and network platforms. Key updates include myHome for simplified home internet and entertainment, a guaranteed phone trade-in program, and Verizon Access offering exclusive event access. Verizon Business is launching a smartphone management solution for business customers. These initiatives highlight Verizon Communications Inc. (NYSE:VZ) commitment to innovation and customer satisfaction, with a refreshed logo and creative approach capturing their impactful contributions. On May 17, Tigress Financial raised their target price on Verizon Communications Inc. (NYSE:VZ) shares from $50.00 to $52.00, alongside a “buy” rating for the stock.
During Q1, 2024 the count of hedge funds holding positions in Verizon Communications Inc. (NYSE:VZ) grew to 67 from 63 in the prior quarter, as reported by Insider Monkey’s database encompassing 920 hedge funds. These holdings collectively amount to around $2.16 billion. Ken Griffin’s Citadel Investment Group emerged as the leading shareholder among these hedge funds during this timeframe.
Ariel Global Fund stated the following regarding Verizon Communications Inc. (NYSE:VZ) in its fourth quarter 2023 investor letter:
“Global communications and technology leader, Verizon Communications Inc. (NYSE:VZ) also traded higher in the period following solid earnings results, highlighted by postpaid consumer net additions and an upward revision to free cash flow guidance. From a competitive and financial standpoint, we view Verizon to be among one of the best positioned telecoms in the world. The company’s solid long-term fundamentals are underscored by its predictable, recurring revenue streams and ~7% dividend yield. At current levels, Verizon is trading near an all-time low valuation presenting a compelling total return story for patient investors.”
Overall VZ ranks 6th on our list of the best communication and media stocks to buy. You can visit 10 Best Communication and Media Stocks To Buy According to Hedge Funds to see the other communication and media stocks that are on hedge funds’ radar. While we acknowledge the potential of VZ 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 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.
