3 Wireless Non-US Stocks Likely to Thrive on Industry Strength

The Zacks Wireless Non-US industry, despite lagging the broader tech sector and S&P 500 in recent performance, is poised for growth due to increasing demand for wireless and fiber connectivity driven by IoT and 5G deployment. While facing challenges like chip shortages and rising raw material costs, companies are focusing on network upgrades, subscriber additions, and strategic acquisitions to enhance revenue and profitability. Zacks highlights TIM S.A. (TIMB), Ceragon Networks Ltd. (CRNT), and PLDT Inc. (PHI) as companies likely to capitalize on these trends, citing their strategic positioning and growth expectations.

Analysis

The Zacks Wireless Non-US industry, despite its recent underperformance (3.3% gain in the past year compared to 9.3% for the S&P 500 and 8.2% for the broader tech sector), presents bullish near-term prospects, evidenced by its Zacks Industry Rank #44, placing it in the top 18% of over 250 industries. Growth is primarily driven by the accelerating deployment of 5G, the proliferation of IoT, and the increasing demand for scalable wireless and fiber connectivity. Key industry trends include network convergence to handle exponential mobile broadband traffic growth, forcing significant investment in network upgrades. However, the sector faces headwinds such as high production costs stemming from chip shortages and elevated raw material prices due to geopolitical events, alongside intense price-sensitive competition from over-the-top service providers. In response, companies are focusing on holistic growth through subscriber additions, churn management, strategic acquisitions, and enhancing average revenue per user via unlimited plans. The industry's current valuation, with a trailing 12-month Price/Book ratio of 1.06X, is considerably lower than the S&P 500's 7.82X and the sector's 9.09X, trading near its five-year median of 0.83X. Specific companies poised to capitalize on these dynamics include TIM S.A. (TIMB), which is aggressively expanding its 5G network in Brazil and projects a 16.1% long-term earnings growth; Ceragon Networks Ltd. (CRNT), specializing in wireless backhaul and fronthaul solutions crucial for 5G infrastructure; and PLDT Inc. (PHI), a leading telecom provider in the Philippines expanding its extensive fiber network and expecting 7.5% long-term earnings growth. TIMB and CRNT carry a Zacks Rank #2 (Buy), while PHI is a Zacks Rank #3 (Hold).

Key Decisions for Investors

• Consider allocating to select non-US wireless equities, particularly those with strong 5G deployment strategies and robust earnings growth outlooks, such as TIM S.A. and Ceragon Networks Ltd., which benefit from a 'Buy' rating and positive growth catalysts.
• Monitor the industry's valuation metrics, as the current low Price/Book ratio relative to broader markets may offer attractive entry points, but be mindful of persistent headwinds like high production costs and competitive pressures that have contributed to recent underperformance.
• For a more diversified approach within the sector, evaluate PLDT Inc. given its strategic infrastructure investments and 'Hold' rating, while closely watching for improvements in its competitive positioning and realization of its 7.5% long-term earnings growth target.