The telecom industry has witnessed bullish trends amid the COVID-19 pandemic thanks to the remote working culture. And the industry is expected to witness consistent demand as the hybrid work culture continues. But the shares of Verizon Communications (VZ) currently look significantly overvalued because the company may not be able to capitalize on the industry trends. Therefore, we think investors could instead bet on quality telecom companies AT&T (T), Lumen Technologies (LUMN), and Cogent Communications (CCOI). So, let’s examine these names. New York City-based Verizon Communications Inc. (NYSE:VZ) offers communications, technology, information, and entertainment products and services worldwide. Its total operating revenues increased 4.3% year-over-year to $32.91 billion in its third-quarter (ended September 30, 2021). However, its total current assets came in at $40.28 billion for the period ended September 30, 2021, compared to $54.59 billion for the period ended December 31, 2020. Also, its 0.41% trailing-12-month asset turnover ratio is 10.7% lower than the 0.46% industry average.
The stock has declined 11.3% in price over the past year to close yesterday’s trading session at $52.78. Also, in terms of forward EV/S, the stock’s 2.95x is 19.5% higher than the 2.47x industry average. In addition, its 2.73x forward Price/Book is higher than the 2.67x industry average. So, it is wise to avoid the stock now.
However, the overall telecom industry is witnessing a surge in demand, because the COVID-19 omicron variant has delayed office reopening schedules, causing a continuation of hybrid work structures. According to a Market Watch report, the Global Telecom Services Market is anticipated to grow more than 5.4% by 2027.Therefore, we think investors looking to benefit from the industry’s growth could bet on quality telecom stocks AT&T Inc. (T), Lumen Technologies, Inc. (LUMN), and Cogent Communications Holdings, Inc. (CCOI) instead.