2 Communication Stocks Likely to Beat Industry Challenges

Industry Overview - The Zacks Communication - Infrastructure industry is facing challenges such as rising capital expenditures for infrastructure upgrades, volatile raw material prices due to geopolitical tensions, supply chain disruptions from the Russia-Ukraine war, and high customer inventory levels. However, the long-term outlook is positive due to increasing demand for digital innovations [1][2]. Current Challenges - The industry is experiencing diminishing returns on investment as companies invest heavily in LTE, broadband, and fiber to meet the growing demand for data and video services, which has compromised short-term profitability [4]. - High raw material prices driven by inflation and geopolitical tensions have disrupted operations and increased production costs, affecting profitability [5]. - Demand erosion is occurring as companies attempt to offset capital expenditures by raising fees, leading customers to seek lower-priced alternatives. Additionally, trade restrictions related to Sino-U.S. tensions have impacted the industry's credibility [6]. Technological Developments - The industry is moving towards network convergence, integrating voice, video, and data communications into a single network. This shift is expected to reduce service delivery costs and enhance broadband competition [7]. Market Performance - The Zacks Communication - Infrastructure industry has underperformed compared to the broader Zacks Computer and Technology sector and the S&P 500, with a growth of only 1.7% over the past year, while the S&P 500 and sector grew by 26.2% and 35.8%, respectively [11]. - The industry is currently trading at a trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio of 2.86X, significantly lower than the S&P 500's 18.36X and the sector's 18.65X [13]. Key Players - IHS Holding Limited is a major player in the industry, operating over 40,000 towers across 11 markets and utilizing a shared infrastructure approach to enhance connectivity and digital service delivery. It holds a Zacks Rank 2 (Buy) [15]. - Anterix Inc. is another key player, holding the largest licensed spectrum in the 900 MHz band across the U.S. and expects to monetize its spectrum assets for long-term value. It carries a Zacks Rank 3 (Hold) [17].