Top communications stocks for May include Opera Ltd., iQIYI Inc., and Netflix Inc., whose prices have climbed by as much as 187% in the last year, far outpacing the broader sector.
Communications stocks, represented by a benchmark exchange-traded fund (ETF)—the Communication Services Select Sector SPDR ETF (XLC)—have provided a total return of 2% over the past 12 months, while the benchmark Russell 1000 Index has increased by 3%. These market performance figures are as of May 15; all statistics in the tables below are as of May 11.
Here are the top three communications stocks in the categories of best value, 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.
|Best Value Communications Stocks|
|Price ($)||Market Capitalization (Market Cap) ($B)||12-Month Trailing P/E Ratio|
|DISH Network Corp. (DISH)||6.23||3.3||1.9|
|Gray Television Inc. (GTN)||7.23||0.7||2.2|
|Consolidated Communications Holdings Inc. (CNSL)||3.75||0.4||2.5|
- DISH Network Corp.: DISH 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. DISH shares shed about 64% of their value in the last year and fell to a 24-year low in April amid increasing subscription cancellations.
- Gray Television Inc.: Gray Television is a television broadcasting company that operates stations in more than 100 markets across the Southern, Midwestern, and Southwestern regions of the U.S. Gray shares fell almost 62% in the last year while the company lost ad revenue and spent money to acquire new TV stations.
- Consolidated Communications Holdings Inc.: Consolidated Communications is a holding company providing digital television, voice, home automation, security, cloud computing, and other communication services. The company's stock is down about 35% in the last year, despite a spike in April when it received a buyout offer from Searchlight Capital Partners and others.
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 1,000% were excluded as outliers.
|Fastest Growing Communications Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Warner Bros. Discovery Inc. (WBD)||12.38||30.2||N/A (see company description)||239|
|InterDigital Inc. (IDCC)||83.18||2.2||517.2||99.7|
|Dave & Buster's Entertainment Inc. (PLAY)||35.02||1.6||54||64|
- Warner Bros. Discovery Inc.: This company is a media and entertainment company that operates brands including CNN, HBO, Food Network, Travel Channel, and Cartoon Network. Revenue more than tripled in the most recent quarter, reflecting the merger of Warner Bros. and Discovery in the second quarter of 2022. The company doesn't have an EPS growth figure in the table above due to an increase in amortization and other administrative costs relative to the prior-year quarter.
- InterDigital Inc.: InterDigital is a maker of digital wireless products, providing technology and infrastructure to consumers, companies, and licensees worldwide. Revenue doubled following a judgment that Chinese tech firm Lenovo must pay InterDigital $139 million related to its use of patented technology. However, InterDigital's patent-licensing deal with Apple and completed share repurchase program may support its growth beyond the Lenovo judgment.
- Dave & Buster's Entertainment Inc.: Dave & Buster's is a restaurant and entertainment company that provides food and beverages as well as entertainment attractions including arcade and skill-based games. In June 2022, Dave & Buster's completed its acquisition of Main Event, which operates 50 family-oriented entertainment centers across 17 states. The company's revenue growth in the latest quarter is partially attributable to this acquisition. Still, comparable-store sales in the most recent quarter climbed by about 19%, reflecting core growth.
Communications Stocks With the Most Momentum
These are the communications stocks that had the highest total return over the past 12 months.
|Communications Stocks With the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Opera Ltd. (OPRA)||13.44||1.2||187.0|
|iQIYI Inc. (IQ)||5.79||5.5||118|
|Netflix Inc. (NFLX)||344.76||153.3||107|
|Russell 1000 Index||N/A||N/A||2.5|
|Communication Services Select Sector SPDR ETF (XLC)||N/A||N/A||1.8|
- Opera Ltd.: Opera is a Norwegian web application developer. It designs and builds web browsers for mobile phones and PCs. Opera recently bolstered the features of its browsers, including adding ChatGPT and free VPN functionality.
- iQIYI Inc.: iQIYI is a Chinese video entertainment platform that provides movies, television dramas, variety shows, and other content. The company finished 2022 with a surge in subscriptions and profitability.
- Netflix Inc.: Netflix is a subscription video streaming service company that also develops and produces a variety of TV shows, movies, and related content. Netflix shares have recovered in the last year after plunging in late 2021 and early 2022 amid subscriber losses.
Advantages of Investing in Communications Stocks
Essential services: Communications services play a critical role in people's day-to-day lives and help shape the digital economy. Companies in this sector provide the infrastructure, products, and services that businesses and consumers require to connect to an increasingly digital world. COVID-19 accelerated the transition to virtual or remote experiences, a trend that consumers have embraced, and is likely to keep demand for innovative communications solutions strong.
Infrastructure spending: As part of the sweeping $1.2 trillion infrastructure bill passed by U.S. 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 Corp. (AMT), Crown Castle Inc. (CCI), and SBA Communications Corp. (SBAC), stand to benefit from the expanding telecommunications rollout.
Risks of Investing in Communications 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 by Congress, would lead to a significant shift in how communication services are offered in the U.S. and create heightened volatility in the sector.
Component shortage: Communication companies heavily rely on particular materials and components to build their products and infrastructure. The recent global chip shortage caused by pandemic-induced supply-chain disruptions, labor issues, and unprecedented demand led to a scarcity of semiconductors, which in turn hobbled the communications sector in 2022. Future shortages of similar products or the materials used to create them could create similar bottlenecks in production.
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