Top Communications Stocks for February 2020

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The communications sector is comprised of companies in a broad range of businesses such as the sale of phone and internet services, be it via traditional landline, broadband or wireless. It also includes companies that are major creators and producers of movies, television shows, and other content. Well-known companies in the sector include Verizon Communications Inc. (VZ), Comcast Corp. (CMCSA), and Google parent Alphabet Inc. (GOOGL). As represented by the Communications Services Select Sector SPDR ETF (XLC), communication stocks have performed on par with the broader market, providing investors with a total return of 24.0% versus the S&P 500’s total return of 24.3% over the past 12 months. These market performance numbers and the statistics in the 3 tables below are as of January 27.

Here are the top 3 communications stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Communications Stocks

These are the communications stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Communications Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
ViacomCBS Inc. (VIAC) 35.79 22.0 4.6
Discovery Inc. (DISCA) 30.32 15.9 11.7
Electronic Arts Inc. (EA) 112.33 32.8 12.2
  • ViacomCBS Inc.: ViacomCBS is a global multimedia company focused on creating premium content and experiences for audiences across the world. The company provides cable networks, content production and distribution, television stations, and digital streaming services. It also operates other internet-based businesses as well as consumer publishing. ViacomCBS announced earlier this month that it had renewed its content carriage agreement with Comcast. The agreement allows for continued retransmission consent of 23 CBS-owned television stations in 15 major markets across the U.S.
  • Discovery Inc.: Discovery is a global media company providing content across a number of distribution platforms, including pay-television, free-to-air and broadcast television, and digital distribution and content licensing arrangements.
  • Electronic Arts Inc.: Electronic Arts is best known as a video game company. The company develops, publishes, and markets video game software for consoles, personal computers, mobile phones, and tablets. Electronic Arts announced last month that it would be launching the Apex Legends Global Series with the help of its subsidiary Respawn Entertainment. The Series would be the first international multi-tournament esports program for the franchise.

Fastest Growing Communications Stocks

These are the communications stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Fastest Growing Communications Stocks
  Price ($) Market Cap ($B) EPS Growth (%)
Netflix Inc. (NFLX) 353.16 154.8 333.3
Electronic Arts Inc.  (EA) 112.33 32.8 248.2
Take-Two Interactive Software Inc. (TTWO) 125.28 14.2 186.4
  • Netflix Inc.: Netflix is an Internet subscription services company that offers streaming movies and television shows, and also distributes DVDs by mail. Netflix increasingly is producing entertainment content. The company posted YOY EPS growth of 333.3% when it reported earnings for Q4 2019. That earnings growth, however, was partly due to an unexpectedly light tax bill following final regulations issued by the U.S. Treasury Department concerning the 2017 tax cuts. The new regulations meant that Netflix had over-accrued tax charges for 2019, and the readjustment in Q4 resulted in net income being higher than it otherwise would have been.
  • Electronic Arts Inc.: See company description above.
  • Take-Two Interactive Software Inc.: Take-Two Interactive Software develops, produces, and markets interactive software including video games and related accessories. The company creates video games for consoles, handheld systems, personal computers, smart phones, and tablets.

Communications Stocks with the Most Momentum

These are the communications stocks that had the highest total return over the last 12 months.

Communications Stocks with the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Charter Communications Inc. (CHTR) 504.67 108.4 75.5
Facebook Inc. (FB) 217.94 621.5 49.5
Alphabet Inc. (GOOG) 1,466.71 1,012.0 36.6
S&P 500 (SPY) N/A N/A 24.3
Communication Services Select Sector SPDR ETF (XLC) N/A N/A 24.0
  • Charter Communications Inc.: Charter Communications is a cable operator and broadband communications services company providing video, Internet and voice services to residential, and business customers. The company also sells video and online advertising, fiber-delivered communications, and information technology solutions to large enterprise customers. Additionally, Charter owns and operates regional sports networks and local sports, news, and community channels.
  • Facebook Inc.: Facebook as a business is synonymous with the company’s namesake social networking platform. This service allows individuals to communicate with other users through sharing of information, photographs, videos, messages, and more. In addition to its main social-networking platform, Facebook operates Instagram, Messenger, WhatsApp, and Oculus.
  • Alphabet Inc.: Alphabet, the parent of Google, is a holding company that, through its subsidiaries, offers web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products. The company announced in early December that then-CEO Larry Page and then-President Sergey Brin would be leaving their respective roles effective immediately. The two remain involved as co-founders, shareholders and members of the company’s Board of Directors. Google CEO Sundar Pichai continues his role as Google CEO but now assumes the role of Alphabet CEO and remains a member of the Board of Directors.

Source: Investopedia

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