2 Communication Stocks Likely to Gain From Strong Industry Prospects

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, supply-chain disruptions and high customer inventory levels amid a challenging macroeconomic environment and geopolitical conflicts remain potent threats.

IHS Holding Limited IHS and Bandwidth Inc. BAND are likely to gain from solid demand for scalable infrastructure for seamless connectivity with the wide proliferation of IoT, continued transition to fiber, cloud and next-gen technologies, and accelerated 5G rollout.

Industry Description

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.

What's Shaping the Future of the Communication - Infrastructure Industry?

Integrated Services: 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. The industry players have enabled enterprises to rapidly scale communications functionalities to 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.

Shrinking Profit Base: Although supply chain woes have declined progressively, the industry is facing a dearth of chips, which are the building blocks of various equipment used by telecom carriers. High raw material prices due to inflation, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected profitability. In addition, Middle East tensions, with Israel/the United States amplifying air strikes against Iran and latent U.S.-China hostilities relating to trade restrictions imposed on the sale of communication equipment to firms based in the communist country, have dented the industry’s credibility, leading to a loss of business. The industry is battling hard-to-mitigate operating risks stemming from volatility in demand, an unpredictable business environment and challenging geopolitical scenarios.

Transition to Technology Powerhouse: With exponential growth in video and other bandwidth-intensive applications owing to the wide proliferation of smartphones and increased deployment of superfast 5G technology, the industry participants are considerably investing in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks while facilitating a seamless transition to the cloud. These companies are rapidly transforming from legacy copper-based telecommunications firms to technology powerhouses with capabilities to meet the growing demand for flexible data, video, voice and IP solutions. The industry participants are also focusing 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. All these efforts have particularly helped firms in the industry cater to the surge in data demand.

Zacks Industry Rank Indicates Bullish Trends

The Zacks Communication - Infrastructure industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #88, which places it in the top 36% 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.

Industry Outperforms S&P 500 & Sector

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 60.2% over this period compared with the S&P 500 and the sector’s growth of 20.5% and 28.4%, respectively.

One-Year Price Performance

Industry's Current Valuation

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 4.23X compared with the S&P 500’s tally of 17.9X. It is also trading below the sector’s trailing 12-month EV/EBITDA of 17.71X.

Over the past five years, the industry has traded as high as 9.82X, as low as 2.12X and at the median of 6.66X, as the chart below shows.

Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

2 Communication - Infrastructure Stocks to Watch

IHS Holding: Based in London, the United Kingdom, IHS Holding is one of the largest independent owners, operators and developers of shared communications infrastructure in the world by tower count. It has more than 37,000 towers across seven markets — Brazil, Cameroon, Colombia, Nigeria, Côte d’Ivoire, South Africa and Zambia. The company’s open-access, shared infrastructure approach ensures a robust and scalable fiber network that multiple operators can utilize. The connectivity of towers enables the extension of fiber infrastructure into key metropolitan areas, facilitating the delivery of digital services to residences, businesses and public entities in collaboration with its clients. The stock has gained an impressive 124.2% in the past year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 8.3% to 78 cents per share since March 2025. It has a VGM Score of A. IHS Holding carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: IHS

Anterix: Headquartered in Woodland Park, NJ, Anterix is a premier wireless communications firm. It reportedly holds the largest licensed spectrum in the 900 MHz band, with coverage throughout the United States, Alaska, Hawaii and Puerto Rico. Anterix expects to monetize its spectrum assets to generate long-term value. The company’s transformative broadband solutions for critical infrastructure industries and enterprises help to unlock applications from analytics to automation to edge monitoring and artificial intelligence. The Zacks Consensus Estimate for current-year earnings has been revised upward by 2162.5% to $3.30 per share since March 2025. Anterix carries a Zacks Rank #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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