We recently compiled a list of the 12 Best Telecom Stocks To Invest In Now. In this article, we are going to take a look at where Lumen Technologies Inc. (LUMN) stands against the other telecom stocks.
The global telecom services market was valued at $1.80 trillion in 2022 and is projected to grow at a 6.2% compound annual growth rate through 2030, as reported by Grand View Research. This growth is driven by factors such as 5G infrastructure investments, a rising number of mobile subscribers, increasing demand for high-speed data, and the growing need for managed services.
This industry has undergone a remarkable evolution since its inception. From early forms of communication like voice and basic visual signals transmitted over wired infrastructure, it has progressed to today’s sophisticated landscape of exchanging audio, video, and text content across diverse wireless networks. This evolution is marked by advancements in data speeds, transitioning from early technologies like GSM and CDMA to 3G, and 4G, and now the commercialization of 5G, enabling rapid data transfer that was once unimaginable.
According to Forbes, one of the driving forces for the telecom industry in 2025 will be the continued rollout and maturation of 5G technology. 5G will deliver faster speeds and improved connectivity and also unlock a new era of possibilities, such as enabling immersive experiences like VR/AR, powering advanced industrial applications, and driving innovation across a wide range of sectors.
While 5G is currently being deployed, attention is shifting to 6G, which promises to deliver significantly enhanced capabilities. IDTechEx recently reported that 6G will revolutionize communication by operating in the terahertz (THz) spectrum. This will enable unprecedented data rates (Tbps) and ultra-low latency. Beyond speed, 6G will unlock new applications like energy harvesting and advanced sensing. To achieve this, 6G will utilize higher frequency bands (7-20 GHz, W-band, D-band) for both access and backhaul. However, higher frequencies present challenges like atmospheric absorption and interference.
Overcoming these requires optimizing link budgets through advancements in semiconductor technology. While CMOS may suffice for lower frequencies, SiGe and InP technologies are crucial for higher frequencies. SiGe BiCMOS offers a good balance of performance and cost, while InP provides the highest performance. Furthermore, Antenna-in-Package (AiP) technology is vital for integrating antennas directly into semiconductor packages, crucial for high-frequency communication, particularly in the mmWave and sub-THz ranges.
Methodology
We sifted through the Finviz stock screener to compile an initial list of top telecom stocks to invest in. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Close-up of a technician’s hands adjusting a communication router.
Lumen Technologies Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 26
Lumen Technologies Inc. (NYSE:LUMN) is a leading technology and communications provider that offers a range of services, including fiber, cloud, edge computing, security, and networking solutions to businesses and consumers worldwide. Operating through its Lumen, Quantum Fiber, and CenturyLink brands, the company delivers high-speed internet, voice services, and a suite of digital solutions.
The company is now prioritizing building the essential infrastructure for the growing AI sector to fuel the telecom business, which involves utilizing its existing fiber network infrastructure to connect data centers and support the massive data transfer needs of AI applications.
It’s actively securing large-scale private connectivity fiber (PCF) deals with major technology companies like Microsoft, Meta, AWS, and Google. These deals involve building dedicated fiber connections between data centers to facilitate high-bandwidth, low-latency data transfer. The company has recently secured over $3 billion in incremental PCF deals, bringing the total to over $8 billion since June.
Its strategy is based on the understanding that AI applications require vast amounts of data to be processed and analyzed. By positioning itself as a key enabler of the AI revolution, Lumen Technologies Inc. (NYSE:LUMN) aims to capitalize on the growth potential in this market.
Third Point Management stated the following regarding Lumen Technologies, Inc. (NYSE:LUMN) in its Q3 2024 investor letter:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. First, Lumen Technologies, Inc. (NYSE:LUMN) announced that its Level 3 (LVLT) subsidiary was doing a fiber infrastructure build to support AI growth. Our aversion to secular decline (most of LUMN is melting copper infrastructure) kept us out of the situation but the AI fairy dust resulted in a massive rerating of LUMN debt and equity. These higher security prices in turn facilitated several moves to refinance portions of the capital structure and extend the runway.”
Overall LUMN ranks 7th on our list of the best telecom stocks to invest in now. While we acknowledge the potential of LUMN as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LUMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.