Stocks like Opera Ltd., Netflix Inc., and Tencent Music Entertainment Group have been particularly active recently because of the sector's prominence in the economy. The stock prices of these companies have increased by more than 80% during the past year, making them market leaders in their field.

The Communication Services Select Sector SPDR ETF (XLC), a benchmark ETF representing the communications sector, has posted a total return of 9% over the past 12 months. This performance is slightly better than the benchmark Russell 1000 Index, which has risen by 7% over the same period. In this piece, we'll examine the top stocks in the telecommunications industry for 2023.

Communication Stocks Dividends

Stocks in the communications sector with the lowest price-to-earnings (P/E) ratios over the past 12 months provide the best value. Investors are paying less for each dollar of profit that can be distributed to shareholders as dividends or buybacks when the price to earnings ratio is low. The top three in this category are Vodafone Group PLC (VOD), DISH Network Corp. (DISH), and Gray Television Inc. (GTN).

Vodafone, a British telecommunications giant, has seen its stock plummet over 40% in the past year due to pessimistic guidance and plans to cut 11,000 jobs in the next three years. DISH Network, a provider of retail wireless and pay-TV services, has lost about two-thirds of its value in the last year due to increased subscription cancellations. Gray Television, which operates local TV stations in 113 U.S. markets, has seen its shares fall 60% in the past year.

Fastest-Growing Communications Stocks

The fastest-growing communication stocks dividends are ranked based on a growth model that equally weighs their most recent quarterly year-over-year (YOY) percentage revenue growth and YOY earnings-per-share (EPS) growth. The top three in this category are InterDigital Inc. (IDCC), Vivid Seats Inc. (SEAT), and Cogent Communications Holdings Inc. (CCOI).

InterDigital, a digital wireless products manufacturer, saw its revenue double in the first quarter following a judgment that Lenovo must pay it $139 million for using its patented technology. Vivid Seats, an online ticket exchange and retail marketplace, posted significant profit growth in Q1 2023 due to robust event supply and strong customer demand. Cogent Communications, an internet service provider, saw its net income increased fivefold from the prior year, boosted by an additional $3 million in interest income and the completion of its acquisition of Sprint Communications' wireline business.

Communications Stocks With the Most Momentum

The communications stocks with the most momentum are those that had the highest total return over the past 12 months. The top three in this category are Opera Ltd. (OPRA), Netflix Inc. (NFLX), and Tencent Music Entertainment Group (TME).

Opera, a Norwegian web application developer, recently added ChatGPT and free VPN functionality to its browsers. Netflix, a subscription video streaming service, saw its shares recover after a slump in late 2021 and early 2022 due to subscriber losses. Tencent Music, the music business subsidiary of Chinese conglomerate Tencent Holdings, saw its stock price nearly double in November 2022 after reporting a significant increase in net profit and music subscription revenue.

Advantages and Disadvantages of Communications Stocks

Due to its importance in the digital economy and the rising need for cutting-edge communications solutions, investing in communications stocks might be fruitful. U.S. lawmakers approved a $1.2 trillion infrastructure bill in 2021, with $65 billion earmarked for increasing internet access and 5G connectivity, which is good news for the industry.

But there are problems that could arise down the road. Antitrust regulation presents a potential threat to the market dominance of large-cap communication technology equities. The recent worldwide chip shortage is only one example of how the industry is susceptible to supply chain disruptions that can lead to future production difficulties.

FAQs

What factors contributed to the significant growth of Opera Ltd., Netflix Inc., and Tencent Music Entertainment Group?

Opera Ltd. has seen substantial growth due to its innovative approach to web application development, including the addition of ChatGPT and free VPN functionality to its browsers. Netflix Inc. managed to recover from a slump in late 2021 and early 2022 by limiting password sharing in the U.S., which led to a surge in subscriptions. Tencent Music Entertainment Group's stock price nearly doubled after reporting an almost 40% increase in net profit and an 18% increase in music subscription revenue.

Is there any effect on large-cap communication stocks from the proposed American Innovation and Choice Act?

Stocks of major technology communication companies like Meta Platforms Inc. and Alphabet Inc. may be considerably affected by the proposed American Innovation and Choice Act. The legislation was enacted to limit the power major firms have in the market. If it were to pass, it would alter how providers of communication services in the United States interact with clients and the data they provide. This may cause the market to become more unstable.