While the stock market has been pretty solid in 2023, it’s been a mixed bag for telecom stocks. Some of the major exchange-traded funds that track telecom stocks are even in the red, so you know there are plenty of telecom stocks to sell.
Many telecom stocks are seeing losses after some reported issues with legacy telecom companies that possibly are facing liabilities from network cables that reportedly contain lead materials.
Some telecom companies are also facing a big debt load from the rollout of 5G technology, which has been an expensive process to upgrade. There’s more competition than ever, putting even more pressure on telecom companies to grow and lowering profit margins.
Finally, telecom companies have a fickle customer base that is willing to jump from one company to another to find a better deal.
While there are some telecom companies that are doing well, the Portfolio Grader really dings the seven companies on this list. Consider a move if any of these are dragging your portfolio down.
Verizon Communications (VZ)
Verizon Communications (NYSE:VZ) is one of those legacy telecom companies facing the triple-whammy of potential liabilities, steep debt and growing competition.
But it’s also a tricky stock to analyze considering it has relatively good fundamentals, with a low forward earnings multiple and a healthy dividend yield. But don’t be fooled by that. I wrote more about why that valuation is deceptive.
The second quarter saw revenue of $32.6, missing analysts’ estimates for $33.24 billion. Even more troubling, revenue was down more than 3% from a year ago.
Verizon may not maintain that dividend with its debt load of $131.4 billion and sinking revenue. The stock is down 15% this year and gets a “D” rating in the Portfolio Grader.
T-Mobile US (TMUS)
T-Mobile US (NASDAQ:TMUS) faces greater competition and reduced revenue growth and another headwind.
Revenue in Q2 was $19.2 billion, but that was a drop of 2.6% from a year ago. T-Mobile also saw net customer additions fall from a year ago.
T-Mobile responded by announcing in August that it’s laying off 5,000 workers, or about 7% of its workforce, and reducing spending on external workers and resources.
Here’s the other issue: when T-Mobile merged with Sprint, T-Mobile majority owner Softbank Group (OTCMKTS:SFTBY) forfeited 48.8 million shares of TMUS stock. But it gets those shares back if T-Mobile’s stock stays over $150 for 45 days.
Smart investors know that if that happens, shares will be diluted and lower their value, so T-Mobile stock sells off any time the stock goes over $150.
TMUS stock is up less than 2% this year. It gets a “D” rating in the Portfolio Grader.
Actelis Networks (ASNS)
Now we’re getting into the smaller telecom stocks to sell. Unlike the large-cap T-Mobile and Verizon, Actelis Networks (NASDAQ:ASNS) has a market cap of only $3 million.
The company provides high-performance broadband over copper and fiber for telecom service providers, businesses and municipalities.
It works with campuses to provide bandwidth to dormitories and laboratories and works with municipalities to provide intelligent traffic system solutions for electronic signs, cameras, controllers and sensors.
Revenue in the second quarter was $3.74 million, down substantially from $4.95 million a year ago. The company said it saw a 64% drop in business from telecom providers as its shifted its work away from telecom and into the Internet of Things.
Perhaps Actelis is a reluctant telecom stock, but for now, it’s still a telecom stock to sell. The stock is down 73% this year and it gets an “F” rating in the Portfolio Grader.
Vodafone Group (VOD)
Vodafone Group (NASDAQ:VOD) is a British telecom company that operates in Asia, Africa and Europe. But it’s been a challenge in recent months.
VOD stock fell more than 55% in the last five years, costing former CEO Nick Read his job in December 2022. Former Chief Financial Officer Margherita Della Valle became permanent CEO in April and has been tasked with leading a turnaround.
Vodafone agreed to a merger in June with CK Hutchison Group’s Three UK to combine the companies’ U.K. operations. The deal would make the combined company the No. 1 telecom company in the United Kingdom, surpassing Virgin Media O2 and EE.
So far, the progress in turning the company around has been slow. VOD stock has been down 9% since April 1, even factoring in a small rebound in the last two weeks. First quarter (fiscal 2024) earnings show revenue is down 4.2%, to 9.11 billion British pounds ($11.29 billion).
Pass on VOD stock for now, it gets a “D” rating in the Portfolio Grader.
Moving iMage Technologies (MITQ)
Moving iMage Technologies (NYSEAMERICAN:MITQ) doesn’t trade on the main indices.
It instead can be found on the NYSE American, a small-cap exchange that’s designed for growing companies.
But Moving iMage isn’t a great bet for growth, or at least, not a great bet for the growth of MITQ stock. The company makes products for the cinema industry, including digital cinema and 3D products, light fixtures, servers and enterprise software solutions.
Earnings for the company’s fiscal third quarter included revenue of $3.7 million, down from $5.8 million a year ago. The operating loss of $500,000 was greater than the loss of $100,000 a year ago.
CEO Phil Rafnson said projects being pushed into the next fiscal year affected this year’s earnings. The company lowered its full-year guidance by 10% to about $18.4 million in revenue and a loss of 13 cents per share.
MITQ stock is down 27% this year and gets an “F” rating in the Portfolio Grader.
Inseego (NASDAQ:INSG) is another penny stock that’s struggling. The stock price is down 52% this year and has been under $1 per share since June.
The company makes 5G routers and gateways, and provides mobile hotspots and cloud management and networking. Products include consumer broadband, enterprise services for businesses, secure servers for government and platforms for schools to provide remote learning.
It’s focusing currently on shifting to fixed wireless access, which supplies 4G and 5G access by radio frequencies instead of cables.
The second quarter saw revenue of $53.6 million, down from $61.9 million a year ago. But on the positive side, the company’s loss of $3.3 million per year and 5 cents per share was better than last year’s loss of $12.4 million and 12 cents per share. Fixed wireless access revenue grew by more than 50%.
I won’t criticize Inseego for shifting gears. But as it stands today, Inseego is a poor telecom stock that should be avoided. It gets a “D” rating in the Portfolio Grader.
Vislink Technologies (VISL)
Vislink Technologies (NASDAQ:VISL) is another telecom company that’s shifting gears. The company provides equipment and services for companies to record and transmit live news, sports, entertainment and news events.
In recent months, the company shifted its focus to serve law enforcement, which is increasingly outfitting departments with cameras to gather evidence and record interactions.
The company installed its AeroLink systems in the Mid-Atlantic region in the second quarter and increased its law enforcement customers with Airborne Video Downlink System (AVDS) technology from five to 12.
So far, though, the shift isn’t helping profitability. Second-quarter revenue of $5 million was down from $6.8 million a year ago, and the loss of $3 million was greater than the $2.5 million loss in the same quarter of 2022.
Perhaps the military/government shift in focus will eventually pay off. But for now, VISL stock is down more than 60% this year and earns a “D” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.