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Chicago, IL – September 12, 2025 – Today, Zacks Equity Research discusses CommScope Holding Company, Inc. COMM and Bandwidth Inc. BAND.
Industry: Communication Infrastructure
Link: https://www.zacks.com/commentary/2749903/2-communication-stocks-likely-to-sail-with-industry-tailwinds
The Zacks Communication - Infrastructure industry is poised to benefit from an increasing user propensity to stay abreast of the latest digital innovations, leading to fiber densification and extensive 5G deployment. However, high capital expenditures for infrastructure upgrades, unpredictable raw material prices caused by tariff wars, supply-chain disruptions amid the prolonged Russia-Ukraine war and high customer inventory levels are threats.
Nevertheless, CommScope Holding Company, Inc. and Bandwidth Inc. are likely to gain from solid demand for scalable infrastructure for seamless connectivity with the wide proliferation of IoT, transition to fiber, cloud and next-gen technologies, and accelerated 5G rollout.
The Zacks Communication - Infrastructure industry players provide various infrastructure solutions for core, access and edge layers of communication networks. Leveraging proprietary modeling and simulation techniques to optimize networks, the firms offer high-speed network access solutions across Internet protocol, asynchronous transfer mode and time-division multiplexed architecture in both wireline and wireless network applications.
Their product portfolio encompasses optical fiber and twisted-pair structured cable solutions, infrastructure management hardware and software, network racks and cabinets, fiber-to-home equipment like hardened connector systems, wireless network backhaul planning and optimization products, couplers and splitters, indoor, small cell and distributed wireless antenna systems and hardened optical terminating enclosures.
Focus on Higher Average Revenue Per User: Industry participants are rapidly transforming themselves from legacy copper-based telecommunications firms to technology powerhouses. At the same time, the firms continue to focus on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers. Also, these firms offer the flexibility to better manage data traffic by leveraging indigenous software-defined networks, enabling low-latency, high-bandwidth applications for faster access to data processing.
Soaring Raw Material Prices: High raw material prices due to inflation, economic sanctions against the Putin regime and intensifying tensions in the Middle East have affected the operation schedules of various firms. Extended lead times for basic components are also likely to hurt the delivery schedule and escalate production costs.
The demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices. The growing tension between the United States and China relating to trade restrictions imposed on the sale of communication equipment to Chinese firms has hurt margins. High tariffs for imported goods by the Trump administration and reciprocal tariffs by countries across the globe have further increased production costs.
Network Convergence Gaining Precedence: With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions to support wireline and wireless network convergence. These investments are likely to help minimize service delivery costs to adequately support broadband competition and expand rural coverage and wireless densification in the long run.
The industry players have enabled enterprises to rapidly scale communications functionalities across a vast range of applications and devices with easy-to-use software application programming interfaces. The firms support high user volumes without affecting deliverability and cost-effectively eliminate performance degradation.
Short-Term Margins at Stake: The exponential growth of mobile broadband traffic and home Internet solutions has resulted in massive demand for advanced networking architecture, forcing service providers to spend more to upgrade infrastructure in the core fiber backhaul network. Although higher infrastructure investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised.
High technological obsolescence of most products has escalated operating costs with steady investments in R&D. High customer inventory levels and a conservative approach toward placing orders for high-value items remain other headwinds for the industry. Extended lead times for basic components are expected to adversely impact the delivery schedule and escalate production costs.
The Zacks Communication - Infrastructure industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #49, which places it in the top 20% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a couple of communication infrastructure stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.
The Zacks Communication - Infrastructure industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has surged 102% over this period compared with the S&P 500 and the sector’s growth of 19.3% and 29.6%, respectively.
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 7.45X compared with the S&P 500’s tally of 18.01X. It is also trading below the sector’s trailing 12-month EV/EBITDA of 18.53X.
Over the past five years, the industry has traded as high as 9.82X, as low as 2.12X and at the median of 6.7X.
CommScope: Headquartered in Hickory, NC, CommScope is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. Since its inception in 1976, the company has created a niche market for itself, helping customers scale network capacity, delivering better network response time and performance, and simplifying technology migration.
CommScope continues to benefit from stringent cost-cutting measures and a focus on core operations. The company is actively pruning its non-core businesses while focusing on inorganic growth to boost its portfolio strength and remain at the forefront of technological innovation.
The Zacks Consensus Estimate for current-year earnings has been revised upward by 21.7% to $1.29 per share since September 2024, while that for the next fiscal is up 35% to $1.62. The stock has gained 210.8% in the past year. It has a VGM Score of B. CommScope sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank) stocks here.
Bandwidth: Headquartered in Raleigh, NC, Bandwidth operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
Bandwidth believes that its evolving portfolio and accretive customer base are the cornerstones of long-term growth across a diverse set of markets. It enables enterprises to rapidly scale communications functionalities to various applications and devices with its easy-to-use software APIs. Continuous innovation on CPaaS offerings allows enterprise customers to have direct access to Bandwidth’s comprehensive suite of products and services.
This Zacks Rank #3 (Hold) stock supports high user volumes without affecting deliverability and cost-effectively eliminates performance degradation. The Zacks Consensus Estimate for current-year earnings has been revised upward by 9.7% to $1.59 per share since September 2024. It has a VGM Score of A.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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