The global telecom industry made great progress amid the pandemic due to the remote lifestyle culture that developed around the globe, with 5G and AI-related innovations accelerating the sector's growth. This momentum is expected to persist for the long term owing to an extended work from home culture amid the omicron variant surge.
According to Statista, total IT sector spending on telecom services is approximately $1.33 trillion. As a pan-global sector, the telecom sector is an all-inclusive industry that has become an integral part of people’s lives.
Therefore, we think it could be wise to add fundamentally sound yet cheap telecom stocks Telefónica, S.A. (TEF), and VEON Ltd. (VEON) to your portfolio now. These stocks have an overall A (Strong Buy) or B (Buy) grade in our POWR Ratings system. Moreover, they have an A grade for Value.
Telefónica, S.A. (TEF)
Headquartered in Madrid, Spain, TEF and its subsidiaries provide telecommunications services in Europe and Latin America. The company serves around 337 million customers.
On Dec. 30, 2021, Microsoft and TEF strengthened their strategic alliance to offer specific confidential hybrid cloud solutions to public administrations and companies in regulated sectors. José Cerdán, CEO of Telefónica Tech, said: “The combination of Microsoft’s technology with Telefónica’s service, management and control capabilities guarantees both sovereignty and privacy as well as scalability and the evolution of infrastructures and citizen services, all with the highest level of quality.”
TEF’s profit for the period was €849 million ($973.12 million), for the quarter ended Sept. 30, 2021,versus a €93 million ($106.60 million) loss in the previous period. Its EPS was €0.12, compared to a €0.04 loss per share in the year-ago period. Also, its other income was €1.14 billion ($1.31 billion), up 257.5% year-over-year.
TEF’s 1.73x forward EV/S is 31.7% lower than the 2.53x industry average. Its 0.58x forward P/S is also 66.3% lower than the 1.73x industry average.
Analysts expect TEF’s EPS to grow 10.8% per annum for the next five years. The stock has gained 6.6% in price over the past month to close yesterday’s trading session at $4.50.
TEF’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Value and a B grade for Momentum and Stability. It is ranked #22 out of 48 stocks in the A-Rated Telecom - Foreign industry. Click here to see additional POWR Ratings for Growth, Sentiment, and Quality for TEF.
VEON Ltd. (VEON)
Headquartered in Amsterdam, the Netherlands, VEON provides mobile and fixed-line telecommunications services. It offers voice, data, and other telecommunication services through wireless, fixed, and broadband internet services.
VEON’s total revenue increased 10.2% year-over-year to $2 billion for its fiscal 2021 third quarter, ended Sept. 30, 2021. Its profit for the period came in at $195 million, compared to a $645 million loss in the previous period. And its $889 million EBITDA represents an8.5% increase year-over-year.
In terms of forward EV/Sales, VEON’s 1.53x is 39.5% lower than the 2.53x industry average. Also, its 0.37x forward P/S is 78.6% lower than the 1.73x industry average.
Analysts expect VEON’s revenue to be $8.39 billion in fiscal 2022, representing a 3% year-over-year rise. The company’s EPS is expected to increase 27.6% year-over-year to $0.37 in fiscal 2022. It closed yesterday’s trading session at $1.70.
VEON’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system.
VEON has an A grade for Value and a B grade for Growth, Stability, and Quality. It is ranked #6 in the Telecom - Foreign industry. Click here to see the additional POWR Rating for Momentum, Sentiment for VEON.
TEF shares were trading at $4.57 per share on Thursday afternoon, up $0.07 (+1.56%). Year-to-date, TEF has gained 7.78%, versus a -1.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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