Whether out-of-town relatives, the friends you met during your travels overseas or colleagues and clients based all over the world, most of us rely heavily on telecommunications. This is even truer after the disruption caused by COVID-19, which changed how people communicate — maybe, forever. This shift, along with improving technology, has made telecommunications company stocks even more attractive potential opportunities for some investors.
Want to learn more about the telecom sector of stock trading? This guide is a great place to start. Find out what is considered a telecom stock, some of the more popular companies in this space, how telecom stocks have performed in recent years and what to look for when deciding which telecom stock to buy.
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What are telecom stocks?
Telecom stocks are a type of communications stock featuring companies that provide the means for people around the world to communicate digitally. This includes the infrastructure on which communication is built — the towers, cables and other technology that help everything from landlines and mobile phones to computers and tablets handle voice and video calls and conferences, as well as any required software and hardware.
Some examples of telecommunications stock companies are Internet service providers, phone service providers, cell and radio tower owners and operators, and those responsible for cabling and other technology related to digital communication.
What are some popular global telecom stocks on eToro?
eToro offers thousands of the world’s most popular stocks on its platform — including communication stocks. While there are many stocks to choose from across a variety of industries, some popular stocks operating in the telecom space includes:
Zoom Video Communications Inc.
COVID-19 changed the way businesses communicate. With employees working externally, isolation restrictions prohibiting in-person visits and travel bans preventing clients and business partners from meeting, the professional world turned toward video conferencing.
That shift helped Zoom (ZM) grow its video meeting user base from 10 million to 300 million in 2020. Now, much like Kleenex in the tissue world and Google with search engines, Zoom has become genericised — an all-encompassing verb when it comes to talking about video conferencing. Zoom stock price skyrocketed in 2020, reaching more than 800% year-on-year growth at one point in October last year. As expected by many, the company did not maintain that level of value, with a price of $250.11 in early October representing a 12-month low. As of 26 October, the stock has recovered slightly to $278.70 It will be interesting to see what long-term impact ongoing vaccine rollouts and future working conditions will have on Zoom video stocks.
T-Mobile US Inc.
One of the leading wireless carriers in the US, T-Mobile (TMUS) has invested heavily in 5G, boasting a bigger geographic footprint of coverage in the country than telecommunications stock competitors AT&T (T) and Verizon (VZ). In April 2020, T-Mobile merged with Sprint.
The integration of 5G technology with everyday life in the US could have a great impact on the value of T-Mobile stocks. New users turning to T-Mobile to take advantage of faster 5G speeds — or current subscribers upgrading their plans — could be a good sign for the future of T-Mobile stocks. As of 26 October, T-Mobile US Inc.’s share price is $116.36.
Whether people know it or not, Comcast (CMCSA) is behind some of the most popular communications offerings in the world, with diversified holdings that reach far beyond the telecommunications spectrum. These include properties like NBCUniversal (and its streaming service Peacock) in the US and Sky in Europe. But much of Comcast’s revenue is built on the cable and broadband infrastructure upon which telecommunications systems operate.
Historically, some have considered Comcast stocks a little less volatile than some of their contemporaries. How well Comcast’s OTT streaming efforts can cover for negative impacts of widespread cord-cutting, and how Comcast navigates an increase in 5G technology use, could clarify the future of Comcast stock’s pricing. Another positive point is that Comcast stocks also traditionally pay dividends.
After a 52-week share price high in early September of $61.80, Comcast Corporation is sitting at $53.76 as of 26 October.
American Tower Corp.
As you might guess, American Tower Corp. (AMT) is a major cell tower operator — a global leader in the space with a presence in major markets, including in the US, Brazil and India. It is well placed to benefit from carriers looking for towers to help boost wireless signal strength, especially with the arrival of the 5G network. While there is some concern about its tech delivery in densely populated urban areas, the company is confident that its infrastructure is more than capable of servicing those in rural and suburban locations.
The company was active in 2020, adding new sites across Africa, breaking into the Polish market and signing a new agreement with T-Mobile. Perhaps just as important is the performance of the company since converting to a REIT in 2012, which means its holdings include income-producing real estate. This has helped American Tower stocks produce value for shareholders in recent years, including 2021, with a one-year return of 30.66% as of 26 October.
Crown Castle International Corp.
Crown Castle (CCI) is another cell tower operator, although it has fewer sites than American Tower. It became a REIT in 2014. Similar to American Tower, its three largest clients — AT&T, Verizon and T-Mobile — are responsible for much of its revenue. And with the race on for subscribers who want high-speed 5G wireless Internet and clear mobile reception, the tower operator could be in for more growth. Crown Castle’s collection of high-value clients who have signed long-term contracts with renewal clauses in them, mean the company could have solid cash flow for years to come. The resulting flexibility could be good for Crown Castle International stocks.
Crown Castle’s share price reached a yearly high of $204.62 in mid-September. Year to date, Crown Castle’s share price has grown 16.18% to $180.08 as of 26 October.
How have telecom stocks fared in recent years?
Unlike many other industries around the world, the telecommunications sector has managed to thrive in the face of COVID-19. In addition to shifting working circumstances, the fact that people were confined to their homes meant much more time spent on devices, which meant increased data usage. That helped telecom company stocks to avoid being negatively impacted as much as the S&P 500 market index.
In times outside the pandemic, the telecommunications sector can be a good target due to the world’s increasing reliance on digital technology. Telecom companies that are able to deliver many everyday essentials — quality Internet and mobile service and the cabling and towers needed to do so — could be good additions to your portfolio.
What should you look for in telecom stocks?
Here are a few pointers that can help you decide which telecom stock to buy next.
Good cash flow can be a sign of a company whose stock has the power to trend in the right direction. Staying up to speed, both literally and figuratively, with the rapidly changing and expanding needs of users requires the flexibility that comes with good cash flow. It can enable everything from adding to or improving existing infrastructure to making key mergers and acquisitions.
Making these changes is a big part of a company’s ability to scale. There is a reason why many of the most popular telecommunications stocks are some of the largest. They have the resources — whether cash, real estate or equipment — to enhance and improve their operations as needed.
Keeping up-to-date on telecommunications news and more specific news about the telecommunication company itself can be other ways to learn more about where you might want to invest. A recent example would be 5G. What has a company been doing to manage this new technology?
Finally, plans for growth can be another element to look for in a telecommunications company. Has the company announced plans for breaking into new markets or developing new service offerings? Be on the lookout for interviews from executives, as well as presentations and reviews.
The telecommunications industry is something that helps power the way we live. With eToro, you can research and monitor stocks and invest with our easy-to-use trading platform from your favourite device.
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This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments. This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.