3 Communication Stocks Set to Ride on Solid Sector Dynamics

Industry Overview - The Zacks Communication - Infrastructure industry is positioned to benefit from strong demand trends and a growing user inclination towards digital innovations, despite facing challenges such as high capital expenditures, margin erosion, and geopolitical conflicts [1][4] - Key players like Anterix Inc. (ATEX), CommScope Holding Company, Inc. (COMM), and Bandwidth Inc. (BAND) are expected to gain from the increasing demand for scalable infrastructure due to the proliferation of IoT, cloud transitions, and accelerated 5G rollouts [1] Industry Description - The industry provides various infrastructure solutions for communication networks, including high-speed network access solutions and a range of products such as optical fiber, structured cable solutions, and wireless network backhaul products [2] Future Trends - The industry is experiencing a seamless transition to cloud services, driven by the growth in bandwidth-intensive applications and the deployment of 5G technology, leading to significant investments in LTE, broadband, and fiber [3] - Companies are transforming from traditional telecommunications firms to technology-driven entities to meet the rising demand for flexible data and communication solutions [3] Profitability Challenges - The industry is currently facing profitability challenges due to a shortage of chips, high raw material prices, and geopolitical tensions affecting business credibility and operations [4] - Ongoing conflicts, such as the Israel-Hamas conflict and the Russia-Ukraine war, have further impacted profitability and operational risks [4] Network Convergence - Operators are moving towards converged network structures that integrate voice, video, and data communications, which is expected to reduce service delivery costs and enhance competition in broadband services [5] Industry Performance - The Zacks Communication - Infrastructure industry has underperformed compared to the broader Zacks Computer and Technology sector and the S&P 500, declining 58.8% over the past year [8] - The industry's current valuation, based on trailing 12-month EV/EBITDA, is 3.29X, significantly lower than the S&P 500's 14.40X and the sector's 14.14X [9] Key Stocks to Watch - Anterix Inc. (ATEX): Holds the largest licensed spectrum in the 900 MHz band and has seen a 36.5% earnings surprise on average over the last four quarters, with a 35.5% upward revision in current-year earnings estimates [10] - CommScope Holding Company, Inc. (COMM): Focused on core operations after divesting its Home Networks business, with a long-term earnings growth expectation of 17.2% [11] - Bandwidth Inc. (BAND): A Communications Platform-as-a-Service provider with a 175.3% average earnings surprise over the last four quarters and upward revisions in earnings estimates for the current and next year [14]