Chicago, IL – October 29, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Arista Networks Inc. ANET, Altice USA, Inc. ATUS and Qualcomm Inc. QCOM.
With a fast-track 5G rollout and increased fiber densification, driven by a rising user propensity to stay abreast of the latest digital innovations, telecom stocks witnessed healthy demand trends in the third quarter of 2024. Despite price volatility due to elevated customer inventory levels, high capital expenditures for infrastructure upgrades, margin erosion, geopolitical conflicts and raging wars, the industry seemed to benefit from higher demand for scalable infrastructure for seamless connectivity amid a wide proliferation of IoT devices.
Arista Networks Inc., Altice USA, Inc. and Qualcomm Inc. appear primed to have benefited from the improved market dynamics.
Steady infrastructure investments in rural areas to bridge the digital divide seemed to infuse confidence in the sector. Telecom firms are facilitating a seamless transition from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and flexible automation.
5G Ecosystem Gaining Traction: The telecom firms are deploying the latest 4G LTE Advanced technologies to deliver higher peak data speeds and capacity, driven by customer-focused planning, disciplined engineering and investments for infrastructure upgrades. The companies are also expanding their fiber optic networks to support 4G LTE and 5G wireless standards as well as wireline connections. Further, leading firms within the industry have been deploying the C-Band spectrum to gain additional coverage.
These mid-band airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in rural and urban areas compared with mmWave. With low latency and increased bandwidth, business enterprises are increasingly embracing the exciting possibilities offered by artificial intelligence and the IoT via the real-time mobile data transfer. As the 5G ecosystem evolves, customers are expected to experience significant enhancements in coverage and speed.
Transition to Cloud, Fiber Networks: The industry is benefiting from a software-driven, data-centric approach that helps customers build their cloud architecture and enhance their cloud experience. Fiber networks are essential for deploying small cells that bring the network closer to the user and supplement macro networks to provide extensive coverage. Telecom service providers are increasingly leaning toward fiber optic cable to meet the burgeoning demand for cloud-based business data and video streaming services by individuals. Moreover, the fiber-optic cable network is vital for backhaul and last-mile local loops, which are required by wireless service providers to deploy the 5G network.
Price-Sensitive Competition: Increased infrastructure spending for network upgrades has largely compromised short-term margins. Aggressive promotional expenses, lucrative discounts and the adoption of several low-priced service plans to attract and retain customers in a challenging macroeconomic environment are eroding profits.
The companies are making significant investments to upgrade their network and product portfolio, including considerable advances in software-defined, wide-area network capabilities and a new Cloud Core architecture that squeeze margins. Wireless operators have been facing challenges due to the disruptive rise of over-the-top service providers in this dynamic industry.
Price-sensitive competition for customer retention in the core business is expected to intensify in the coming days. Aggressive competition is likely to limit the ability to attract and retain customers and affect operating and financial results.
Network Convergence: With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions to support wireline and wireless network convergence. The industry players have enabled enterprises to rapidly scale communications functionalities to various applications and devices with easy-to-use software application programming interfaces.
The wide proliferation of cloud networking solutions further results in increased storage and computing on a virtual plane. As both consumers and enterprises use the network, there is tremendous demand for quality networking equipment.
Waning Profits: Although supply chain woes have declined progressively, the industry is facing a dearth of chips, which are the building blocks of various equipment used by telecom carriers. Moreover, high raw material prices due to Middle East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedules of various firms. High technological obsolescence of most products has escalated operating costs, while high customer inventory levels and a conservative approach toward placing orders for high-value items remain headwinds.
Software-Centric Network Rationalization: The industry participants are realigning their wireless network toward a software-centric model to cater to increasing business demands and customer needs through remote facilities. The industry players are focused on bringing improved operational efficiencies through network simplification and rationalization, boosting end-to-end provisioning time and driving standardization.
Moreover, the firms are offering a variety of pathways for delivering services through a combination of network-based video transcoding, packaging, storage and compression technologies to provide new IP video formats, live TV, streaming services and home gateways to connected devices inside and outside the home.
Many telecom firms are likely to report earnings in the coming weeks. A solid earnings performance of the telecom sector could sow the seeds for future investments and research & development (R&D) in network and 5G-enabled devices for superior 5G capabilities as the industry seeks to capitalize on its inherent growth potential.
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Arista: Santa Clara, CA-based Arista offers cloud networking solutions for data centers and cloud computing environments. In addition to high capacity and easy availability, its cloud networking solutions promise predictable performance and programmability, enabling integration with third-party applications for network management, automation and orchestration.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products. In addition, the company offers one of the broadest product lines of data center and campus Ethernet switches and routers in the industry. Arista currently has a Zacks Rank #2 and an Earnings ESP of +0.96%. The company is scheduled to report results after the closing bell on Nov. 7.
Arista Networks, Inc. price-eps-surprise | Arista Networks, Inc. Quote
Altice: Headquartered in Long Island City, NY, Altice is one of the largest broadband communications and video services providers in the United States. The company is focused on accelerating its network expansion plans, market penetration and fiber network upgrades for long-term sustainable growth. It offers a range of broadband speeds for all budgets, from Altice Advantage Internet to multi-gigabit services for enterprise customers.
The company is on track with its five-year plan to build a fiber-to-the-home (FTTH) network and deploy its home communications hub. It believes that the FTTH network will be more resilient with reduced maintenance requirements and lower power usage. Altice is building a fiber network to deliver broadband speeds of up to 10 Gbps, which underscores its investment in technology. ATUS is scheduled to report results after the closing bell on Nov. 4. The stock currently has an Earnings ESP of +66.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Altice USA, Inc. price-eps-surprise | Altice USA, Inc. Quote
Qualcomm: Headquartered in San Diego, Qualcomm is a fabless semiconductor company. It is one of the largest manufacturers of wireless chipsets based on baseband technology. The company is focusing on retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches.
Leveraging processors with multi-core CPUs with cutting-edge features, amazing graphics and worldwide network connectivity, Qualcomm Snapdragon mobile platforms are fast with superb power efficiency. Smartphones and mobile devices built with Snapdragon mobile platforms enable immersive augmented reality and virtual reality experiences, brilliant camera capabilities, superior 4G LTE and 5G connectivity with state-of-the-art security solutions. This Zacks Rank #1 stock has an Earnings ESP of +0.48%. The company is scheduled to report results on Nov. 6.
QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote
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