Top Communications Stocks for November 2022

The communications sector includes companies that sell phone and internet services via traditional landline, broadband, or wireless. The communications sector also includes companies that create and produce of movies, television shows, and other content. Well-known companies include Meta Platforms Inc. (formerly Facebook), Comcast Corp., and T-Mobile US Inc.

Communications stocks, represented by a benchmark exchange-traded fund (ETF)—the Communication Services Select Sector SPDR ETF (XLC)—have provided a total return of -38.4% over the past 12 months compared to -18.2% for the benchmark Russell 1000 Index. The market performance figures and all statistics in the tables below are as of Oct. 21, 2022.

Here are the top three communications stocks with the best value, the fastest growth, and the most momentum.

Best Value Communications Stocks

These are the communications stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.

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• Lumen Technologies Inc.: Lumen Technologies is a company that provides communication and technology services for residential and business customers, including voice, network integration, cloud, and security services. Lumen announced on Oct. 3 that it completed the sale of its incumbent local exchange carrier (ILEC) business in 20 states to Brightspeed for $7.5 billion. The company said the sale will enable it to focus on growing its enterprise business, including expanding Lumen's Quantum fiber service to customers. Lumen still retains its local exchange carrier business in 16 other states.
• Paramount Global: Paramount Global, formerly ViacomCBS, is a global media and entertainment company operating in the areas of TV entertainment, cable networks, and filmed entertainment. The company's businesses include streaming services, CBS, Paramount Pictures, and other similar ventures.
• DISH Network Corp.: DISH Network is a holding company that, through subsidiaries, provides retail wireless and pay-TV services. The company also offers direct broadcast satellites, fixed-satellite service products, and video programming services.

Fastest Growing Communications Stocks

These are the top communications stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

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• Liberty Broadband Corp.: Liberty Broadband owns interests in a variety of companies, including Charter Communications Inc. (CHTR) and GCI Holdings LLC. These companies provide wireless, data, video, voice, and similar services to residential, educational, and business clients.
  
• Liberty Formula One Group: Liberty Formula One Group operates businesses across the media, communications, and entertainment industries. The company's revenue comes from businesses including Liberty SiriusXM Group, Formula One Group, and the Braves Group. Liberty Formula One reported Q2 results on Aug. 5. Net earnings climbed 28% year-over-year (YOY) on rising revenue, driven by increases in race promotion revenue, media rights fees, and sponsorship fees. Liberty reports third quarter financial results on Nov. 4.
• The Walt Disney Co.: Walt Disney is a global entertainment company. Its businesses include media and entertainment distribution, theme parks, and cruise vacations. It sells streaming entertainment through Disney+ and other platforms. Disney reports its fourth-quarter results on Nov. 8.
  

Communications Stocks With the Most Momentum

These are the communications stocks that had the highest total return over the past 12 months.

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• World Wrestling Entertainment Inc.: World Wrestling Entertainment is a media and global entertainment company. It delivers programming on platforms including television programming, premium live events, digital media, and publishing.
• Nexstar Media Group Inc.: Nexstar Media Group is a diversified media company that owns, operates, and provides services to broadcast stations across the U.S. It operates television, digital, and mobile media platforms. On Oct. 3, Nexstar announced that it completed its acquisition of a 75% ownership in The CW Network LLC from co-owners Warner Bros. Discovery (WBD) and Paramount Global. The sellers will each retain a 12.5% ownership interest. The financial terms of the transaction were not disclosed in the company's press release.
• T-Mobile US Inc.: T-Mobile US provides mobile services under the brands T-Mobile and Metro by T-Mobile as well as wireless devices and accessories. On Sept. 28 the company launched Advanced Industry Solutions, a suite of services tailored to specific industries such as retailing, manufacturing, logistics, and municipal government. The suite includes applications, connectivity, compute, and devices for smart solutions. North America’s smart retail market is expected to nearly triple over five years to $20.8 billion by 2025.
  

Advantages of Investing in Communication Stocks

Essential Services: Communication services play a critical role in people's day-to-day lives and help shape the digital economy. Many companies in the sector provide services that helped people connect during the COVID-19 pandemic. For instance, video conferencing platform Zoom Video Communications, Inc.’s (ZM) software became a tool for employers to collaborate with their staff amid border closures and shutdowns. As a result of Zoom’s popularity during the health crisis, investors speculated on its future growth, driving its share price up more than 800% over nine months in 2020. As trends such as telehealth and working remotely continue to grow in popularity, communication stocks that provide services in these areas offer investors tremendous upside potential.

Infrastructure Spending: As part of the $1.2 billion infrastructure bill passed by lawmakers in 2021, $65 billion has been allocated toward expanding broadband access and 5G connectivity nationwide. National spending on communication infrastructure benefits companies that build, service, and lease such equipment. For example, cell tower operators, such as American Tower Corporation (AMT), Crown Castle Inc. (CCI), and SBA Communications Corporation (SBAC), stand to benefit from the expanding telecommunications rollout. 

Risks of Investing in Communication Stocks

Antitrust Legislation: Leading big tech communication stocks, such as Meta Platforms, Inc. (META) and Alphabet Inc. (GOOGL), face potential challenges from antitrust legislation that could weaken their grip on digital communication. The proposed American Innovation and Choice Act, which has bipartisan support in the House and Senate, would lay down laws prohibiting advantages these companies have in marketing their products and make it easier for competitors to communicate with customers and collect information about their users. The legislation, if passed through Congress, would lead to a significant shift in how communication services are offered in the United States and create heightened volatility in the sector.

Semiconductor Shortage: Communication companies heavily rely on semiconductors to build their products and infrastructure. Therefore, the global chip shortage caused by pandemic-induced supply chain disruptions, labor issues, and unprecedented demand may cause ongoing headwinds to the sector for the foreseeable future.

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