In this article, we will be taking a look at the 11 best communication stocks to buy now.
The communications service sector is traditionally considered to include only media and broadcasting companies. However, in recent times, the sector has become more diversified with the inclusion of several technology companies as well. The Global Industry Classification Standard launched a new communication services sector in September 2018, and this is what brought about the change in what is classified as communications stocks. As a result of this new sector categorization, even some of the FANG stocks — Facebook (Meta Platforms (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Netflix, Inc. (NASDAQ:NFLX) — joined the communication services sector. The inclusion of these stocks in the sector highlights the inherent diversity of the communications sector, which was then turned into one of the largest sectors in the S&P 500.
According to a Baron Funds report on the communications sector published in October 2018, with the above-mentioned changes, this sector became the sixth-largest sector in the S&P 500, accounting for about 9% of the index by weight. The inclusion of mega tech companies alongside traditional communication services companies like AT&T Inc. (NYSE:T), Verizon Communications (NYSE:VZ), and T-Mobile US, Inc. (NASDAQ:TMUS) meant that the communication sector was one that was ever-expanding. Today, it includes media, broadcasting, entertainment, telecommunications, and even technology companies. This diversification may be why the sector has been performing well in 2023. In January, the S&P 500 communication services sector rose by about 12.7%, while the broader benchmark rose by merely 6.6%, for instance.
A major reason for the expansion and continued growth of the communications sector is the COVID-19 pandemic, as illustrated by the examples of the social media, streaming services, and mobile connectivity areas within communication services. The pandemic revolutionized the communications sector and led to a growth in the number of mobile subscribers in 2020. According to a GSM Association report published in 2020, the number of mobile connections rose from 5.2 billion at the end of 2019 to 7.9 billion in the first quarter of 2020. The growing use of enterprise messaging, online meetings, and online team collaborations since 2020 has also led to forecasts expecting the Unified Communication as a Service (UCaaS) market to grow exponentially. In 2024, this market is expected to be valued at $24.8 billion, growing at a compound annual growth rate of 9.5% between 2020 and 2024.
This growth has been aided by governmental support for the communications sector. In a previous article, we mentioned how in 2021, the US government passed a $1 trillion infrastructure bill that earmarked over $65 billion to upgrade broadband networks across the country. A year after this bill was passed, the Federal Communications Commission (FCC) was able to launch the Affordable Connectivity Program, which lowered the cost of high-speed internet services by $30 per month.
Additionally, the US Department of Commerce also launched a $42 billion Broadband Equity, Access and Deployment (BEAD) Program to further increase governmental support for the communications sector. With this immense growth, investors today are increasingly attracted to communications stocks, leading us to compile a list of the best stocks in this sector to buy today.
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Let’s now take a look at the 11 best communication stocks to buy now.
Our Methodology
We selected our list of the best communication stocks by considering hedge fund sentiment. The stocks selected are popular among the 943 hedge funds tracked by Insider Monkey in the fourth quarter. They also have positive ratings from financial analysts, and price targets suggesting upside potential according to TipRanks. The stocks are ranked on the basis of the number of hedge funds holding stakes in them, from the lowest to the highest number.
Best Communication Stocks To Buy Now
11. TELUS International (NYSE:TU)
Number of Hedge Fund Holders: 17
TELUS International (NYSE:TU) is a communication services company based in Vancouver, Canada. The company offers telecommunications and information technology products and services. It operates through its Technology Solutions and Digitally-Led Customer Experiences Segments.
Sebastiano Petti at JPMorgan holds an Overweight rating on TELUS International shares as of February 13.
TELUS International is one of the three largest telecom providers in Canada, accounting for about 90% of the country’s $53 billion telecommunications market. According to TipRanks, analysts on Wall Street rate the stock as a Strong Buy. The average price target on the stock is $22.43, with a high forecast of $23.96, as of March 22. TELUS International was trading at $19.79 on the same date, and this gives the stock an upside potential of 13.34%.
There were 17 hedge funds long TELUS International in the fourth quarter, with a total stake value of $255 million.
TELUS International, like AT&T Inc., Verizon Communications, and T-Mobile US, Inc., is a communications services stock many elite hedge funds are piling into today.
10. Nexstar Media Group, Inc. (NASDAQ:NXST)
Number of Hedge Fund Holders: 31
Nexstar Media Group, Inc. (NASDAQ:NXST) is a broadcasting company providing digital media and more. The company focuses on the acquisition, development, and operation of TV stations and interactive community websites. It offers free programming to TV-viewing audiences.
Guggenheim’s Curry Baker holds a Buy rating and a $22o price target on Nexstar Media Group, Inc. shares as of January 19.
The company owns 200 TV stations across over 100 different American media markets. As a result, while most broadcasting companies might be struggling today, Nexstar Media Group, Inc. is thriving. Between 2019 and 2023, the shares have risen by 151.35%. As of March 22, the company also has a dividend yield of 3.31%. Nexstar Media Group, Inc. has raised its dividend for the past nine years in a row, making it a reliable passive income investment as well.
Cardinal Capital was the largest shareholder in Nexstar Media Group, Inc. at the end of the fourth quarter, holding 943,570 shares. In total, 31 hedge funds were long the stock, with a total stake value of $458 million.
9۔ DISH Network Corporation (NASDAQ:DISH)
Number of Hedge Fund Holders: 37
DISH Network Corporation (NASDAQ:DISH) is a cable and satellite company based in Englewood, Colorado. The company provides pay-TV services in the US. It operates through its Pay-TV and Wireless segments.
As of March 13, Michael Rollins at Citigroup holds a Buy rating on DISH Network Corporation shares.
DISH Network Corporation has been working to increase its 5G network coverage in the US. By the third quarter, the company has constructed 10,000 sites capable of providing coverage to 35% of the US population. In January, DISH Network Corporation disclosed that it had begun constructing 15,000 more 5G sites to provide broadband coverage to over 60% of the population. According to TipRanks, analysts on Wall Street have an average price target of $18.33 on the shares, which were trading at $9.58 as of March 22. This gives the stock an upside potential of 91.34%.
DISH Network Corporation was found among the 13F holdings of 37 hedge funds in the fourth quarter. Their total stake value was $617 million.
8۔ Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 48
Twilio Inc. (NYSE:TWLO) is a provider of software and communications solutions in the US and internationally. The company is based in San Francisco, California, and operates cloud communications platforms enabling developers to build, scale, and operate customer engagement in software applications.
T. Michael Walkley, an analyst at Canaccord, holds a Buy rating on Twilio Inc. shares as of March 22. The analyst also raised his price target on the stock from $88 to $97.
Twilio Inc. is the communications services company behind the integration of OpenAI’s GPT-3 model since 2020. As such, the company may be set to benefit from the tailwinds in the AI industry, especially since the rise of ChatGPT. Twilio Inc. saw its revenue increase by 21.58% year-over-year in the fourth quarter, coming in at $1.02 billion. Revenue from its Data & Applications segment increased even faster, by 25% year-over-year, coming in at $118 million.
ARK Investment Management was the largest shareholder in Twilio Inc. at the end of the fourth quarter, holding 7.4 million shares. A total of 48 hedge funds were long the stock in that quarter, with a total stake value of $1.5 billion.
RiverPark Advisors, an investment advisory firm, mentioned Twilio Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Twilio Inc. (NYSE:TWLO): TWLO was also a top detractor for the quarter. Despite better-than-expected 3Q results, management provided 4Q guidance well below expectations and lowered its long-term organic revenue growth expectations from 30% to 15%-25%. A key component of these lowered expectations was the company’s failure to execute in enterprise software sales, which was a fundamental part of our investment thesis, so we exited the position during the quarter.”
7۔ AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 55
AT&T Inc. is an integrated telecommunication services company based in Dallas, Texas. The company operates through its Communications and Latin America segments. It offers wireless voice and data communications, handsets, wireless data cards, and more.
On January 24, Citigroup’s Michael Rollins reiterated a Buy rating on AT&T Inc. shares.
Over the past three years, AT&T Inc. has grown its revenue at an annualized rate of 3.4%, from $112.5 billion to $120.2 billion. From 2020 to 2022, the company’s sales expanded from $72.6 billion to $81.8 billion. Analysts on Wall Street consider AT&T Inc. to be a Moderate Buy, according to TipRanks. The average price target on the stock is $22.11, while the shares were trading at $18.54 on March 22. This gives the stock an upside potential of 19.26%.
Our hedge fund data shows 55 funds long AT&T Inc. in the fourth quarter, with a total stake value of $1.6 billion.
6۔ Verizon Communications (NYSE:VZ)
Number of Hedge Fund Holders: 56
Verizon Communications is another integrated telecommunication services company on our list. The company provides technology, information, and entertainment products and services. It operates through its Verizon Consumer Group (Consumer) and Verizon Business Group (Business) segments.
Gregory Williams at Cowen holds an Outperform rating on Verizon Communications shares as of January 25.
Verizon Communications is a highly reliable dividend stock, having raised its yield for the past 18 years in a row. The company also has a dividend yield of 6.92% as of March 22, making it more attractive. According to TipRanks, the average price target on Verizon Communications shares is $45.30, while the stock was trading at $37.74 on March 22. This gives the shares an upside potential of 20.03%.
Out of the 56 hedge funds long Verizon Communications in the fourth quarter, Citadel Investment Group was the largest shareholder in the company, holding 10.1 million shares. The total stake value in the company was $1.5 billion.
Verizon Communications, like AT&T Inc. and T-Mobile US, Inc, is among the most popular communications stocks on the market today.
5. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 72
Comcast Corporation (NASDAQ:CMCSA) is a cable and satellite company. It is based in Philadelphia, Pennsylvania.
An Outperform rating was reiterated on Comcast Corporation shares on January 27 by analyst Gregory Williams at Cowen.
Comcast Corporation has raised its dividend yield for the past 15 years and has a yield of 3.14% as of March 22. According to TipRanks, analysts on Wall Street placed an average price target of $44.24 on the shares, which were trading at $36.99 on March 22nd. This gives the shares an upside potential of 19.6%.
At the end of the fourth quarter, 72 hedge funds were long Comcast Corporation. Their total stake value was $3.7 billion.
ClearBridge Investments, an investment management firm, mentioned Comcast Corporation in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“That balance served the Strategy well throughout the year, enabling outperformance against the benchmark in all four quarters. Results in the last three months were driven by a long-time media position in Comcast Corporation (NASDAQ:CMCSA), which we consider a durable compounder due to its consistent revenue growth and free cash flow generation. Comcast shares saw a snapback after a difficult first half of the year caused by cord cutting in its cable business and slowing subscriber growth in its broadband business. A flexible balance sheet and strong cash generation enabled the company to repurchase shares during the selloff earlier in the year.”
4. Charter Communications, Inc. (NASDAQ:CHTR)
Number of Hedge Fund Holders: 74
Charter Communications, Inc. (NASDAQ:CHTR) is a communication services company based in Stamford, Connecticut. The company offers broadband connectivity and cable operations in residential and commercial areas in the US.
Kutgun Maral at RBC Capital holds an Outperform rating on Charter Communications, Inc. shares as of January 31.
In the fourth quarter, Charter Communications, Inc. saw its internet revenues rise by 3.9% year-over-year while mobile revenues rose by 38.6% year-over-year. Analysts on Wall Street consider the stock to be a Moderate Buy, and have placed an average price target of 36.44% on the shares, according to TipRanks. Considering that Charter Communications, Inc. was trading at $352.29 on March 22, this price target represents an upside potential of 36.44%.
Our hedge fund data for the fourth quarter shows 74 funds long Charter Communications, Inc., with a total stake value of $4.6 billion.
ClearBridge Investments, an investment management company, mentioned Charter Communications, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Cable stocks have been pressured for the past year as broadband growth has slowed following a pull forward of demand during the pandemic and the industry faces rising competition from wireless carriers offering fixed wireless access. In particular, shares of Charter Communications, Inc. (NASDAQ:CHTR) were pressured by its recently announced multiyear capex plan to accelerate network upgrades. While this reduces free cash flow available for buybacks in the medium term, it sustains the company’s competitive advantage and should accelerate long term growth. The company also has ambitious goals to expand its footprint into adjacent and rural markets, taking advantage of the federal and state broadband subsidies. We added opportunistically to Charter on the pullback.”
3. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 94
T-Mobile US, Inc. is a provider of mobile communications services in the US, Puerto Rico, and the US Virgin Islands. The company is based in Bellevue, Washington.
On 16 March, Morgan Stanley’s Simon Flannery reiterated an Overweight rating on T-Mobile US, Inc. shares.
In the fourth quarter, T-Mobile US, Inc. revenues came in at $20.27 billion. According to TipRanks, analysts at Wall Street see the stock as a Strong Buy, with about 12 Buy ratings on the shares and two Hold ratings. The average price target on the shares is $181.75. T-Mobile US, Inc. was trading at $144.67 on March 22, and this gives the shares an upside potential of 25.63%.
There were 94 hedge funds long T-Mobile US, Inc. in the fourth quarter. Their total stake value was $3.7 billion.
2. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 117
Netflix, Inc. is a movies and entertainment company operating in the communication services sector. It is based in Los Gatos, California.
Jason Bazinet at Citigroup holds a Buy rating on Netflix, Inc. shares as of March 16.
As of this March, Netflix, Inc. has about 230 million paid memberships on its streaming platform in over 190 countries. In 2022, the company increased its revenues to $31.6 billion, representing a growth rate of 6.5% year-over-year. According to TipRanks, analysts on Wall Street see the stock as a Moderate Buy, with 17 Buy ratings and 16 Hold ratings.
Out of the 943 hedge funds tracked in the fourth quarter, 117 funds were long Netflix, Inc.. Their total stake value was $8.1 billion.
ClearBridge Investments, an investment management company, mentioned Netflix, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Netflix, Inc. (NASDAQ:NFLX) is another earnings reset name that has taken decisive actions, developing an ad-supported subscription tier and cracking down on password sharing, that have helped its shares rerate strongly. On an individual stock basis, positions in Broadcom, Visa, Netflix, Nike and Comcast were the leading contributors to absolute returns during the period.
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
Meta Platforms, Inc. is an interactive media and services company operating in the communication services sector. It is based in Menlo Park, California.
On March 21, Meta Platforms, Inc. shares were upgraded from Equal Weight to Overweight by Morgan Stanley analysts.
In the fourth quarter, Meta Platforms, Inc. generated revenues of $32.2 billion. According to TipRanks, analysts on Wall Street have placed an average price target of $226.75 on the shares, which were trading at $202.16 on March 22. This represents an upside potential of 12.16%.
Meta Platforms, Inc. was found among the 13F holdings of 194 hedge funds in the fourth quarter, with a total stake value of $15.6 billion.
Weitz Investment Management, an investment management firm, mentioned Meta Platforms, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Unfortunately, the performance story of the year is told by the Fund’s detractors. We’ve written at length in prior quarters about Meta Platforms, Inc. (NASDAQ:META)’s struggles to adapt both to changes in Apple’s iOS platform, as well as pivots to new formats like short-form video (Reels) and platform investments in the metaverse that have dragged shares lower all year.
Meta, Alphabet, Amazon and CarMax were all top detractors for the quarter and calendar year periods (FIS and Liberty Broadband, respectively, complete the quarterly and calendar-year detractor lists.) To varying degrees, each is managing through cyclical challenges during a period of substantial investor pessimism. Drawdowns of this magnitude are painful, and it may be prudent for management to moderate the pace of some investments, but we remain encouraged by their long-term focus. In the short run, cutting spending indiscriminately to “defend earnings” may lessen the pain of a drawdown, but it seldom grows a company’s business value — the ultimate prize. We added to both CarMax and Meta on weakness, and all four remain core holdings.”
See also 13 Best Communication Services Stocks To Invest In and 12 Best Communication Stocks To Buy Now.
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This article is originally published at Insider Monkey.
