Communications stocks—like TMUS, GOOGL, and SPOT—are intriguing options for investors to consider after the recent wave of market-wide turbulence. The following names may also be considered technology companies since they leverage impressive innovations to keep us all connected. Given this, they may feel some rumbles should the Tech sector continue to sag relative to the rest of the market.
Nonetheless, a strong case could also be made that the following connectivity-enabling firms are more utility-like in nature. Undoubtedly, each one of the firms offers essential services that can withstand the monthly budget cuts come the next period of economic instability. Whether we’re talking Gmail, music streaming, or wireless plans, it’s just so tough to cut any one of the following essential services, making them intriguing options to consider amid macro headwinds.
Shares of telecom titan T-Mobile have been mostly shrugging off the wave of volatility hitting the markets this July, now down just 2% from its recent peak. Undoubtedly, T-Mobile has continued reaping the rewards of being head and shoulders above the competition. The company is a 5G network leader, with a U.S. footprint that covers more ground than its two top rivals combined (98% of Americans are within T-Mobile’s 5G range). As the firm goes full speed ahead with its continued expansion, it’s looking almost impossible for rivals to catch up. With such a remarkable competitive edge, I’m staying bullish on TMUS stock.
At writing, TMUS stock is up a respectable 28.4% in the past year, thanks in part to a recent fourth-quarter spike that saw 934,000 postpaid phone additions. Most notably, annual churn rates came in at an industry-low 0.87%.
It’s not just the new customer adds that’s impressive, but it’s the fact that T-Mobile knows how to hang onto its users. With such an impressive and expansive network, it’s not a mystery as to why T-Mobile has pretty much been the only investable big-name telecom stock in these past few years. The company’s impressive promos and value proposition don’t hurt, either.
For the full year, T-Mobile expects to add 5-5.5 million postpaid subscribers along with a 22% boost to free cash flow. Indeed, the dividend, which was initiated last September, seems poised for a big raise if T-Mobile can hit its targets. I think it can. Moreover, T-Mobile could be the next big dividend grower as it balances growth with giving back to investors. For such a dominant firm, a 19.5 times forward price-to-earnings (P/E) multiple, which is in line with the past-year range, doesn’t do the stock justice.
What Is the Price Target for TMUS Stock?
TMUS stock is a Strong Buy, according to analysts, with 17 unanimous Buys assigned in the past three months. The average TMUS stock price target of $191.96 implies 5.3% upside potential.
Alphabet stock has been rocked hard amid the latest pullback in tech, now down over 10% from all-time highs. Indeed, the correction came fast and it came furious, as investors hit the sell button with aggression after the AI search giant’s latest quarter. With OpenAI getting into the search business with a product called SearchGPT (it looks a lot like Perplexity AI’s search product to me), there’s a new haze of uncertainty surrounding GOOGL stock. Despite the rough post-earnings sell-off, I’m inclined to stay bullish as Alphabet still possesses one of the best AI engines in the world.
Alphabet’s underwhelming quarter played a huge role in pushing tech stocks off a July cliff. The earnings were good, but they weren’t great, especially given the hype built in the past few months going into the number. Notably, YouTube was a sore spot, while investors seemed just a bit more impatient when it came to AI.
Undoubtedly, AI efforts are going to take not only money but time, perhaps a lot of time, to pay off in a big way. Amid the recent rotation back to mid-caps, it seems like investors are ready to punch their ticket off the AI train as the early excitement begins to wear off.
As Alphabet advances Gemini, its Waymo self-driving project, and its TPUs (Tensor Processing Units), which is reportedly being leveraged by Apple (AAPL) for training models, I believe the recent correction has created a great buying opportunity.
Sure, OpenAI is a threat to search, but with GOOGL stock going for 21.9 times forward P/E, well off the highs for the past year, I’m giving CEO Sundar Pichai and the company the benefit of the doubt.
What Is the Price Target for GOOGL Stock?
GOOGL stock is a Strong Buy, according to analysts, with 30 Buys and seven Holds assigned in the past three months. The average GOOGL stock price target of $204.62 implies 19.3% upside potential.
Spotify is a music streamer that’s been on an explosive run over the past year, surging more than 116%. With new all-time highs in sight, potential catalysts on the horizon, and a very reasonable valuation, I’ll be staying bullish on the name, even amid the latest tech rumbles.
Undoubtedly, the latest (second) quarter results have been music to investors’ ears. Premium subscribers grew 12% year-over-year, while ad-supported sales surged 13%.
As the company seeks to improve the value of its ads (think Creative Lab and all-new AI tool Quick Audio), I’d not be surprised if Spotify ends up as one of the big early beneficiaries of generative AI. Indeed, generative AI music may be far off from going mainstream. However, when it comes to AI-enhanced ads, Spotify may just be in the running to take its ad business and margins to the next level.
At 57.5 times forward P/E, SPOT isn’t a value stock, but it is trading on the low end of the past-year range. Given recent strength and realistically monetizable AI offerings, the streaming stock looks primed to buy.
What Is the Price Target for SPOT Stock?
SPOT stock is a Strong Buy, according to analysts, with 22 Buys, five Holds, and one Sell assigned in the past three months. The average SPOT stock price target of $392.80 implies 14.2% upside potential.
The following communications stocks are Strong Buys on Wall Street for a reason. Whether we’re talking about T-Mobile and its continued dominance, Alphabet and its still-underrated AI potential, or Spotify and its ability to grow via advancing its ad tech, the following tech-savvy firms seem to have what it takes to finish the year strong. Of the trio, analysts see the most upside to be had in GOOGL stock (19.3%) for the year ahead.
