4 telecom stocks poised to continue their winning streaks in 2021

Economies around the globe have been hit hard by the coronavirus outbreak since the beginning of the year. The pandemic has badly affected various sectors, from retail to hospitality, leading to wrecked financial markets and mass layoffs. However, telecom is one such sector that made the most out of this challenging situation.

Although the COVID-19 pandemic has disrupted the normal business operations of various telecom companies, the sector aided countless customers with seamless connectivity and various technological innovations, particularly 5G. The pandemic has emphasized the need for high-speed, high-bandwidth and low-latency connections, all of which are the ultimate benchmarks of an advanced 5G ecosystem, as virtual communication replaced in-person interactions.

This technological development comes as a boon, especially at a time when governments are passing stay-at-home orders, leaving people dependent on virtual means of communication. Even though consumer adoption of advanced wireless technologies is still in the early stages, telecom companies are leaving no stone unturned to create innovative business models for higher revenues.

2020 Highlights
With various governments banning Huawei for 5G deployment and tech behemoths racing against time to stay ahead of the curve with top-notch tools in the new digitized world, telcos are undertaking several measures to enhance customer experience with greater emphasis on network reliability.

Telcos are primarily focused on upgrading the overall network infrastructure with improved software-defined, wide-area network capabilities. This has proved to be quite beneficial for organizations to realign its wireless network system toward a software-centric model to cater to accretive business demands through remote facilities.

That said, many software companies have achieved significant profitability, fueled by accelerated adoption of advanced technologies like online collaboration tools and cloud computing owing to the rising trend of work-from-home facilities. Network operators are fast-tracking strategic plans to meet the exceptional bandwidth demand while competing to keep revenue margins ahead of eroding prices.

Also, with many companies reporting massive spikes in data usage, major players in the telecom sector are assisting content providers to predict the demand for more on-the-go experiences. Revamping online advertising and delivering streaming services through network-based video transcoding and compression technologies are some of the vital developments that have taken place in 2020. Nevertheless, in 2021, organizations are likely to focus on three strategic factors to strengthen their foothold in this dynamic sector — commercializing wireless networks through new products and services, enhancing entertainment experiences with new offerings and upgrading customer engagement through a nuanced approach.

What to Expect in 2021?
With 5G making rapid inroads in global markets, telecom companies are aiming to invest more in wireless network technologies to spur long-term growth. As the wireless solutions witness healthy momentum among consumers and enterprises, it is expected that 5G will drive the industry to greater heights in 2021. According to an article published in GSMA, it is anticipated that 5G will generate $700 billion worth of economic value.

Further, telecom companies have witnessed the increasing adoption of Wi-Fi 6, IoT and Edge Computing for streamlined connectivity. With 5G connectivity and edge computing complementing each other, enterprises are expected to boost advanced use cases such as contactless shopping and smart shelves. Consequently, telcos can achieve operational efficiency with adequate bandwidth savings and enhanced network capacity while capturing the full potential of Industry 4.0.

That said, one cannot avoid the fact that communication service providers are facing a tough time to commence 5G operations at full swing, thanks to the ongoing COVID-19 situation, escalated spectrum costs and cut-throat competition. Despite such significant challenges, telcos are adopting holistic approaches to generate higher average revenue per user, improve customer service and attract new customers while gaining solid traction in both wireless and wireline networks.

Supported by such focused endeavors, we have zeroed in on four major telecom stocks that are well positioned to outshine their rivals in 2021. The selection has been made with the help of the Zacks Stock Screener, wherein these stocks have a market capitalization of more than $1 billion, year-to-date price change of more than 20% and carrying either Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ubiquiti Inc. Based in New York, NY, Ubiquiti specializes in developing advanced networking technology for enterprises, communication service providers and consumers globally. The company is committed to reducing operational costs with a self-sustaining mechanism for rapid product support, while increasing direct-to-consumer sales through its web stores. Strategic product launches at disruptive prices help it to gain a competitive advantage over its rivals. These efforts are likely to boost Ubiquiti’s investments in inventory & operations management supported by a robust business model in 2021.

With a market cap of $17.2 billion, shares of the Zacks Rank #1 company have gained 44.6% compared with industry’s growth of 38.5% in the year-to-date period. It has a long-term earnings growth expectation of 18.4%. Ubiquiti surpassed estimates thrice in the trailing four quarters, the positive earnings surprise being 27.9%, on average.

NETGEAR, Inc. This San Jose, CA-based global telecommunications company offers innovative Internet-connected products for seamless networking, broadband access and network connectivity. It is well positioned to benefit from robust networking solutions and maintains a competitive edge with new product launches, based on Wi-Fi 6 standards. With a solid demand for connected home products in the wake of rising work-from-home trend driven by growing subscriber base, NETGEAR aims to leverage latest technological innovation to boost growth in 2021.

With a market cap of $1.2 billion, shares of the Zacks Rank #2 company have gained 60.6% against industry’s decline of 4.7% in the year-to-date period. NETGEAR topped estimates in each of the trailing four quarters, the positive earnings surprise being 60%, on average.

Calix, Inc. Based in San Jose, CA, Calix is a leading networking technology company with a broad portfolio of broadband communications access systems and software platforms. The company partners with various service providers to establish future-proof networks with streamlined connectivity and drives business transformation on the back of effective network strategies. It is well positioned to benefit from customer base expansion and strong execution amid coronavirus-induced disruptions, while retaining its leadership in 2021.

With a market cap of $1.9 billion, shares of the Zacks Rank #2 company have soared 293% compared with industry’s growth of 69.7% in the year-to-date period. Calix outpaced estimates in each of the trailing four quarters, the positive earnings surprise being 72.2%, on average.

Vocera Communications, Inc. Based in San Jose, CA, Vocera is a leading mobile operator company that offers intelligent communication and workflow solutions in healthcare, retail, energy and other mission-critical mobile work environments. It caters to nearly 1,700 healthcare facilities and sells its products through direct sales force and resellers. Backed by the acquisition of EASE Applications, a cloud-based communication platform, Vocera is well positioned to benefit from large customer expansions in 2021.

With a market cap of $1.3 billion, shares of the Zacks Rank #2 company have surged 85.8% compared with industry’s growth of 24.3% in the year-to-date period. The company surpassed estimates thrice in the trailing four quarters, the positive earnings surprise being 95.1%, on average.
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