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U.S. Telecom Sector Analysis

UpdatedOct 01, 2022
DataAggregated Company Financials
Companies506
  • 7D-2.8%
  • 3M-13.6%
  • 1Y-43.5%
  • YTD-41.4%

Over the last 7 days, the Telecom industry has dropped 2.8%, driven by a pullback from Alphabet of 3.1%. Overall the industry is down 43% in 12 months. Earnings are forecast to grow by 17% annually.

Sector Valuation and Performance

Has the U.S. Telecom Sector valuation changed over the past few years?

DateMarket CapRevenueEarningsPEAbsolute PEPS
Sat, 01 Oct 2022US$3.2tUS$1.5tUS$187.6b14x17.2x2.2x
Mon, 29 Aug 2022US$3.7tUS$1.5tUS$186.9b16.4x20x2.5x
Wed, 27 Jul 2022US$3.7tUS$1.4tUS$212.3b16.8x17.4x2.6x
Fri, 24 Jun 2022US$4.3tUS$1.5tUS$213.9b17.5x20.3x3x
Sun, 22 May 2022US$3.9tUS$1.5tUS$218.3b17.4x17.7x2.6x
Tue, 19 Apr 2022US$4.5tUS$1.4tUS$224.7b21.5x20x3.1x
Thu, 17 Mar 2022US$4.6tUS$1.4tUS$225.7b16.7x20.2x3.2x
Sat, 12 Feb 2022US$4.8tUS$1.4tUS$221.9b19.6x21.6x3.4x
Mon, 10 Jan 2022US$5.3tUS$1.4tUS$194.6b19.7x27.3x3.8x
Wed, 08 Dec 2021US$5.4tUS$1.4tUS$194.4b19.9x28x3.9x
Fri, 05 Nov 2021US$5.8tUS$1.4tUS$195.9b26x29.7x4.2x
Sun, 03 Oct 2021US$5.8tUS$1.3tUS$179.3b25.3x32.2x4.3x
Tue, 31 Aug 2021US$6.0tUS$1.3tUS$179.9b23.6x33.6x4.5x
Wed, 07 Jul 2021US$5.7tUS$1.3tUS$174.1b26.3x32.9x4.3x
Sat, 10 Apr 2021US$5.1tUS$1.3tUS$130.4b27.1x39.4x4.1x
Fri, 01 Jan 2021US$4.7tUS$1.2tUS$98.7b24.4x48x3.9x
Mon, 05 Oct 2020US$4.1tUS$1.2tUS$108.9b18.8x37.2x3.4x
Thu, 09 Jul 2020US$3.7tUS$1.2tUS$102.7b17.9x36x3.1x
Wed, 01 Apr 2020US$3.0tUS$1.2tUS$128.5b14.4x23.4x2.5x
Sat, 04 Jan 2020US$3.6tUS$1.2tUS$133.7b20.6x27.3x3x
Tue, 08 Oct 2019US$3.4tUS$1.2tUS$131.9b19.8x25.4x2.8x
Price to Earnings Ratio

25.4x


Total Market Cap: US$3.4tTotal Earnings: US$131.9bTotal Revenue: US$1.2tTotal Market Cap vs Earnings and Revenue0%0%0%
U.S. Telecom Sector Price to Earnings3Y Average 31.3x202020212022
Current Industry PE
  • Investors are pessimistic on the American Communication Services industry, indicating that they anticipate long term growth rates will be lower than they have historically.
  • The industry is trading at a PE ratio of 17.2x which is lower than its 3-year average PE of 31.3x.
  • The 3-year average PS ratio of 3.5x is higher than the industry's current PS ratio of 2.2x.
Past Earnings Growth
  • The earnings for companies in the Communication Services industry have grown 12% per year over the last three years.
  • Revenues for these companies have grown 7.5% per year.
  • This means that more sales are being generated by these companies overall, and subsequently their profits are increasing too.

Industry Trends

Which industries have driven the changes within the U.S. Telecom sector?

US Market-2.48%
Telecom-2.77%
Wireless Telecom1.10%
Entertainment-1.35%
Interactive Media and Services-2.87%
Telecom Services and Carriers-3.94%
Media-5.65%
Industry PE
  • Investors are most optimistic about the Entertainment industry even though it's trading below its 3-year average PE ratio of 692x.
    • Analysts are expecting annual earnings growth of 30.2%, which is higher than its past year's earnings decline of 5.9% per year.
  • Investors are most pessimistic about the Telecom Services and Carriers industry, which is trading below its 3-year average of 20.2x.
Forecasted Growth
  • Analysts are most optimistic on the Wireless Telecom industry, expecting annual earnings growth of 39% over the next 5 years.
  • This is better than its past earnings decline of 35% per year.
  • In contrast, the Telecom Services and Carriers industry is expected to see its earnings grow by 3.5% per year over the next few years.

Top Stock Gainers and Losers

Which companies have driven the market over the last 7 days?

CompanyLast Price7D1YValuation
NFLX NetflixUS$235.444.0%
+US$4.0b
-61.6%PE20.6x
TMUS T-Mobile USUS$134.171.4%
+US$2.3b
5.8%PE97.9x
TWTR TwitterUS$43.845.4%
+US$1.7b
-29.3%PS6.4x
SE SeaUS$56.054.2%
+US$1.3b
-82.5%PS2.7x
ZI ZoomInfo TechnologiesUS$41.664.0%
+US$653.6m
-32.3%PE133x
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Latest News

GOOGL

US$95.65

Alphabet

7D

-3.1%

1Y

-29.9%

SE

US$56.05

Sea

7D

4.2%

1Y

-82.5%
Sep 29

Sea Limited: Recent Updates And Thoughts On The Company

Summary Garena is working on new games pipelines as seen from Phoenix Labs and investment in VIC Game Studios. While Shopee’s recent layoffs were unfortunate, achieving self-sufficiency is key for management and investors. I remain cautiously optimistic that my investment thesis is intact. Investment Thesis This was not a great year for Sea Limited (NYSE: SE) as its recent share price declined yet again since my previous publications on the company. The recent news of Shopee's layoff, Garena's declining growth rates, and the uncertainty of SeaMoney's future contribution to its total revenue has dampened investors' confidence, leading to the sell-off in the company. And it is understandably why. I have already laid out my investment thesis in my previous articles, so if you like, I do highly encourage you to head here for my 2Q22 update and a deep dive on SeaBank. Before the next quarter's result, I thought I like to publish a short article to talk about some updates that I've gathered on the company, particularly on Garena and Shopee. These updates reinforce my thesis that Shopee is able to attain profitability and that Garena has taken the steps needed to mitigate its concentration risk and reaccelerate its growth. Garena Recap on 2Q22 Result Image Created From Sea Limited 10-Q Image Created From Sea Limited 10-Q For a quick recap on Garena's performance, 2 of its key operating metrics were its quarterly active users ("QAU") and quarterly paying users ("QPU"), and both have been declining consecutively for the past few quarters due to post normalization. As a result, its paying user ratio also fell. That ultimately led to a declining adjusted EBITDA margin of 37.1% in 2Q22, down to pre-COVID levels. As Garena is the only cash cow for Sea Limited at the moment, investors were right to be concerned about whether the company has sufficient capital to invest in the growth of Shopee's emerging markets, and also SeaMoney, which is still relatively young in its business lifecycle. And weeks later, the management announced its decision to exit all markets in Latin America (LatAm), except for Brazil, and also multiple rounds of layoffs. But first, let's put these aside for later as we talk about Garena now. Since Garena derives most of its revenue from Free Fire, this has proven to be a huge concentration risk. And a key question that lies ahead for most investors is, are they making concrete moves in developing their own games to mitigate such risks and reaccelerate their growth rates? Phoenix Labs: Working Behind The Scenes On Jan 2020, Garena announced the acquisition of Phoenix Labs, the creator behind Dauntless, a free-to-play action RPG game, which is immensely popular, and they were intending to launch a mobile version of it. However, since then, there was no updates on its release, and that kept investors wondering and waiting. Moreover, in the past few earnings call, Sea's management has been hinting that there are new games in the pipeline, and the most recent game was Blockman Go. FaeFarm by Phoenix Labs Thanks to a friend of mine, I was able to dig out more information on Garena up and coming new game, with one of them being FaeFarm, a Co-Op RPG game released by Phoenix Labs. This is set to launch in Spring 2023 (23 March - 23 June) on Nintendo Switch. Here is a YouTube trailer, and if you head over to the comment section, you get to see that many users were impressed and excited about the game. While that does not indicate any future success, it does speak that it is a well-anticipated game. New Logo By Phoenix Labs On May 7th, 2022, Phoenix Labs' blog announced a new logo and this sentence particularly caught my eye: "Today, we are proud to say that we have close to 10 projects ranging from early R&D to being in full production." New Projects by Phoenix Labs From the same blog, this image also showcases Phoenix Labs' upcoming new games, although, the game titles are not disclosed. This is completely in line with what Sea's management has said in the previous earnings call, and this is assuring to know. Moving forward, I reckon that investors should place more attention on Phoenix Labs' website for any new titles. Garena Investment In VIC Game Studios On July 27, Garena invested in a Korean-based video game developer company, called VIC Game Studios ("VGS"). VGS has been working on a mobile game called Black Clover Mobile. According to this article, VGS is set to launch the game in 2022, even though, there are no updates from the company itself. However, they have released multiple game teasers on YouTube, and you can see how anticipated this is from the comments section. I believe this investment by Garena shows that they are focused on self-developing their own games, and this is a sign of more to come. Shopee - Multiple Rounds of Layoffs & Decision To Exit Latin America On 9th Sept, Shopee announced its decision to exit all Latin America's markets, except for Brazil, and most recently on 19th Sept, news of Shopee's layoffs continued. Just a day later, CEO Forrest Li wrote a memo to its employees, which you can see here. The message is clear - achieving profitability is key. Recently, I also had a conversation with my friend and he was talking about how existing employees were afraid of getting laid off.

CMCSA

US$29.33

Comcast

7D

-7.9%

1Y

-48.7%
Sep 23

Frontier Communications: Fairly Valued With 57.9% Price Attractiveness

Summary This article seeks to provide a valuation and pricing comparison for FYBR vs the Top Integrated, Wireless & Alternative Telecommunication Services Stocks. I will provide a pricing mechanism for FYBR by comparing financial metrics to the industry, assess its financial health, and finally attempt to find an appropriate pricing mechanism. I give Frontier Communications Parent, Inc. an overall financial health score of 89.2%, and a 57.9% current price attractiveness score relative to its peers. FYBR is ranked 10th out of the Top 60 Telecommunication Services Stocks in terms of its relative valuation attractiveness. Want to skip the analysis & go straight to finding out who had the best (or worst) valuations in Telecommunication Services? Download my research for free here. In searching for opportunities within the market, I like to consider which sectors of the market have been performing badly over the past 12 months. I try to uncover opportunities for investment-grade firms that have been unfairly dragged down by their peer-group despite solid financial health and performance. We've been analyzing the Telecommunications industry, which has been dragged down by the broader Communications sector (down 40% over the last 12 months) despite solid balance sheets and low earnings multiples. Today's research piece considers Frontier Communications Parent, Inc. (FYBR), which primarily offers data and Internet, voice and video services in 25 states. For those unfamiliar with my analysis methodology, you'll find in-depth explanations for my research in an earlier piece relating to AT&T (T). (Data & prices correct as of pre-market 20th September, 2022. Top Integrated, Wireless & Alternative Telecommunication Services Stocks referred to can be found on this Seeking Alpha screener.) Frontier Communications Parent, Inc.'s Base Financial Health FYBR's financial health looks fairly solid on a normal operating basis, with excellent gross profits, average net margins for the industry, and good debt serviceability. There are concerns in the firm future outlook portion of our health check. However the industry at large is facing a slight downturn in revenue and profitability, so this is not a serious threat at this time. Author Weighting these scores, we get a fairly comfortable 89.2% overall health score for FYBR. Not bad, but room for improvement on the future outlook side. Author Assessing Frontier Communications Parent, Inc.'s Pricing Attractiveness While our valuation metrics vs. the industry comparison is sub-50% (meaning potential overpricing), note that there is a negative P/FCF.M metric weighing down the weighted score. This negative FCF (free cash flow) figure can be explained by an abnormal "Invest. in Marketable & Equity Securities" transaction in the most recent report ($2.3B spent) which allows us to not carry any concern around this metric. Author If we re-weight these metrics to ignore the FCF.M metric, then we arrive at a more attractive 57.9% valuation attractiveness score, which I believe is more relevant. Author Finding An Appropriate Valuation Method For Frontier Communications Parent, Inc. As for finding a pricing mechanism that we can use to value the firm, we can rely on our previous workings that helped us determine the most appropriate set of metrics to use for the Telecommunications Industry.