The U.S. telecom stocks continued to ride on the stock market euphoria over the past week, fueled by the feel-good factor surrounding the multi-billion infrastructure investment plan by President Biden to boost the post-pandemic economic revival. The $2 trillion investment plan over an eight-year period includes a $100 billion provision to significantly expand broadband access to Americans, as the administration aims to fortify its technological prowess to thwart the dominance of countries like China.
The plan envisions reaching the underserved areas of the country and prioritizing support for broadband networks affiliated with local governments, nonprofit organizations and cooperatives to encourage strong competition with privately-owned companies. This, in turn, is likely to be beneficial for consumers in the long run through competitive pricing mechanism. The plan has also earmarked funds for the tribal areas that lack access to high-speed Internet. Furthermore, the U.S. President has allotted $180 billion for R&D and future technologies that are likely to sow the seeds for technology innovation to leapfrog competition against China and South Korea in areas like 5G. The infusion of funds and federal support likely provided a sense of security to the industry and propelled its growth momentum.
Meanwhile, U.S. lawmakers are reportedly giving final touches to a legislation that aims to tackle semiconductor crunch that has hard hit global auto production. The shortfall of chips that are critical components of vehicle manufacturing has dealt a body blow to the auto industry, and global production is likely to be curtailed by 1.28 million in 2021. In order to address this crisis, President Biden had inked an executive order in February to launch a 100-day review process of the supply chain mechanism and devise ways to increase domestic production. He is also seeking a fund of $37 billion for legislation to ramp up production capacity to encourage job additions while reducing supply bottlenecks.
Regarding company-specific news, 5G coverage expansion, product launches, collaborations and strategic agreements primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Verizon Communications Inc. VZ has deployed signal repeaters from two different firms at multiple points across its network to augment 5G Ultra Wideband coverage and improve end-user experience. The signal repeaters from FRTek and SureCall are comparatively smaller than small cells and consume lesser energy, making them ideal cost-effective solutions that can be installed at various points.
A signal repeater is an electronic device within a communication network that accepts signals from nearby cell sites, amplifies them and re-transmits to underserved areas in dense urban locations such as multi-storied corporate buildings and residential apartments. Verizon aims to tap these functionalities to gain a competitive edge against rivals and better serve its customers.
2. Ericsson ERIC recently unveiled Ericsson Open Lab to accelerate the development of virtualized 5G Radio Access Network (RAN) technologies for a seamless communications infrastructure. Markedly, the latest launch aims to explore Open RAN technologies like orchestration and virtualization on the back of collaboration activities.
Evidently, the collaboration will help advance 5G standards as the industry continues to embrace next-gen architectures for flexible networks, thereby delivering enhanced customer experiences. It is worth mentioning that the offering comes as a boon for communication service providers and enables them to drive Cloud RAN innovation, globally, especially when providing differentiated services in a dynamic telecommunications industry is a persistent challenge amid rapid technological shifts.
3. Juniper Networks Inc. JNPR has inked a definitive agreement with 21Vianet Group, Inc. to deploy its routing solutions in order to meet the exponential growth in data traffic. The deal with the leading carrier-neutral data center service provider in China is also likely to help Juniper address the digital transformation needs of customers as the resurgent coronavirus wave portend fresh lockdown restrictions.
Operating a network of more than 50 data centers across 20 cities in China with more than 51,000 network cabinets that offer above 2000G of port capacity and 1000G of dedicated high-speed cloud access, 21Vianet is catering to an ever-growing customer base. The dedicated MX Series Universal Routing Platforms from Juniper that utilize segment routing traffic engineering protocols are likely to upgrade the 21Vianet’s network and enable it to continue providing unhindered service to the swelling customer base.
4. Given the unprecedented demand for 5G devices and machines globally, establishing a scalable and streamlined network infrastructure has become a dire necessity. To deploy such 5G networks quickly, Nokia Corporation NOK will incorporate Intel Corporation’s 3rd Generation Xeon Scalable Processors in its avant-garde AirFrame data center solutions.
This combination will not only drive Nokia AirFrame’s compute capacity but also enable superior data throughput with reduced energy consumption. Interestingly, Nokia and Intel have been sharing a working relationship for quite some time now, and the addition of the Intel Xeon Scalable Processors in Nokia’s hardware will further boost the long-standing partnership.
5. After entering into a series of financial and strategic agreements, Corning Incorporated GLW has inked an extended long-term contract with Samsung Electronics’ subsidiary Samsung Display. As part of this new seven-year deal, Samsung Display will convert all its preference shares into 115 million common shares, of which 35 million common stock will be repurchased by Corning.
This buyback will make Samsung Display entitled to an ownership stake of nearly 9%, which is equivalent to possessing 80 million common shares. Markedly, the recent transaction is likely to reinforce the long-standing partnership by benefitting both companies with enhanced operational efficiencies supported by a robust capital structure.
The following table shows the price movement of some of the major telecom stocks over the past week and the six months.
In the past five trading days, Qualcomm has been the best performer with its stock gaining 4.9%, while Bandwidth was the only stock that declined with its stock falling 3%.
Over the past six months, Arista has been the best performer with its stock appreciating 26.1%, while Bandwidth has lost the maximum at 44.7%.
Over the past six months, the Zacks Telecommunications Services industry has jumped 5.2% on average, while the S&P 500 has gained 18.5%.
What’s Next in the Telecom Space?
In addition to 5G deployments and product launches, all eyes will remain glued on how the infrastructure investments benefit the telecom sector with the earnings season around the corner.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
Today, Download Marijuana Moneymakers FREE >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Corning Incorporated (GLW) : Free Stock Analysis Report
Ericsson (ERIC) : Free Stock Analysis Report
To read this article on Zacks.com click here.