Top communications stocks for June include Opera Ltd., Netflix Inc., and Tencent Music Entertainment Group, the share prices of which have risen more than 80% 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 9% over the past 12 months, while the benchmark Russell 1000 Index has increased by 7%.
Here are the top three communications stocks in the categories of best value, fastest growth, and the most momentum. All statistics in the tables below are as of June 6.
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 | |
| Vodafone Group PLC (VOD) | 9.58 | 25.9 | 2.1 |
| DISH Network Corp. (DISH) | 7.54 | 4.0 | 2.3 |
| Gray Television Inc. (GTN) | 7.78 | 0.7 | 2.3 |
Source: YCharts
- Vodafone Group PLC: Vodafone is a British telecommunications company providing voice, data, and other wireless services around the world. Vodafone’s stock has plunged more than 40% in the past 12 months as the company has issued pessimistic guidance and announced plans to eliminate 11,000 jobs in the next three years.
- 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 two-thirds of their value in the last year and fell to a 24-year low in April amid an uptick in subscription cancellations.
- Gray Television Inc.: Gray Television owns or operates local television stations in 113 U.S. markets, reaching about 35% of U.S. households. It also owns several production, marketing, and digital businesses. Gray Television shares have fallen 60% in the past year.
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 (%) | |
| InterDigital Inc. (IDCC) | 86.13 | 2.3 | 517.2 | 99.7 |
| Vivid Seats Inc. (SEAT) | 7.68 | 0.6 | 650.0 | 23.2 |
| Cogent Communications Holdings Inc. (CCOI) | 61.80 | 3.0 | 550.0 | 3.0 |
Source: YCharts
- InterDigital Inc.: InterDigital is a maker of digital wireless products, providing technology and infrastructure to consumers, companies, and licensees worldwide. The company’s revenue doubled in the first quarter after a judgment that Chinese tech firm Lenovo must pay InterDigital $139 million related to its use of patented technology.
- Vivid Seats Inc.: Vivid Seats provides an online ticket exchange and retail marketplace. It facilitates the secondary sale of tickets for sports, music, and theater events. The company posted significant profit growth for the first quarter of 2023, which it attributed to both robust event supply and strong customer demand.
- Cogent Communications Holdings Inc.: Cogent Communications is an internet service provider operating a global fiber optic network. Cogent’s first-quarter net income increased fivefold from the prior year when the company recorded a $21 million loss on interest rate swap agreements. Earnings were also boosted by an additional $3 million in interest income. Also in the first quarter, the company completed its acquisition of Sprint Communications’ wireline business.
Communications Stocks With the Most Momentum
These are the communications stocks that had the highest total return over the past 12 months.
| Communications Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Opera Ltd. (OPRA) | 18.44 | 1.7 | 291.6 |
| Netflix Inc. (NFLX) | 399.29 | 177.5 | 102.5 |
| Tencent Music Entertainment Group (TME) | 7.68 | 13.2 | 80.3 |
| Russell 1000 Index | N/A | N/A | 6.7 |
| Communication Services Select Sector SPDR ETF (XLC) | N/A | N/A | 8.5 |
Source: YCharts
- Opera Ltd.: Opera is a Norwegian web application developer. It designs and builds web browsers for mobile phones and PCs. Opera recently added ChatGPT and free VPN functionality to its browsers.
- 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. Netflix subscriptions jumped in May after the company began limiting password sharing in the U.S.
- Tencent Music Entertainment Group: Tencent Music is the music business subsidiary of Chinese conglomerate Tencent Holdings (TCEHY). The company offers online music, karaoke, live-streaming, and online concert services through its apps QQ Music, Kugou Music, Kuwo Music, and WeSing. The price of Tencent Music stock nearly doubled in November 2022 after the company reported an almost 40% increase in net profit alongside an 18% increase in music subscription revenue.
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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As of the date this article was written, the author owns Netflix shares.
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