From an enterprise perspective, 5G has been a game changer for high-speed data transfer and low-latency connections. Yet, many consumers report relatively unimpressive experiences with the 5th generation of telecommunication networks. Part of this might be due to the more niche benefits 5G provides over 4G and the fact that around 40% of users across the U.S. do not have phones designed with 5G. Thus, some hyped-up telecom companies that surged during the 5G rollout might become 5G stocks to sell.
Moreover, investors need to remember that not all 5G stocks are created equal. Some have extensive access to the frequency spectrum of radio waves, which makes them competitive while others rely on acquired assets to provide similar services. Ultimately, it comes down to which companies have the infrastructure and earnings necessary to continue innovating and expanding their offerings both to individuals and businesses. Here are three 5G stocks to sell due to financial burdens or overall uncompetitiveness that may not be able to remain relevant in the rapidly expanding 5G industry.
Charter Communications (CHTR)
As far as telecom expansions go, Charter Communications (NYSE:CHTR) may have missed the mark with its strategy this year. During its Q4 2023 earnings report, the company reported a 61,000-customer decrease in its internet service for small businesses and residential users but still seemed to improve its wireless customers by 550,000. Despite these numbers, the company’s profits dipped enough to send investors into a sell pattern, slashing the company’s stock by over 20% in the following weeks.
Following its Q1 2024 earnings report, the company tumbled a little more, likely due to stagnant YOY revenue growth. It has now lost another 72,000 customers in Q1 of 2024. In response, Charter has announced the closure of six customer service call centers across the U.S., likely a cost-cutting measure. Following this, the stock is likely to bump in value, after which would be a good time to sell.
Cogent Communications (CCOI)
While media attention was fairly quiet about Cogent Communications’ (NASDAQ:CCOI) acquisition of T-Mobile’s (NASDAQ:TMUS) Wireline business (formerly Sprint), it will likely become a double-edged sword for investors. This stems from the inordinate cost associated with the acquisition, in which T-Mobile sold the business to Cogent for $1 under the agreement that Cogent would take on all of the costs associated with T-Mobile’s original purchase.
In other words, T-Mobile, one of the most successful companies in the 5G sector, did not see the value in retaining infrastructure for wired connections. For Cogent, this purchase may be part of a niche strategy betting on the future of enterprise connection needs for physical filament-based data transfers. However, it puts an extensive financial burden on the relatively specialized internet service provider for now.
From an investor’s perspective, the current dip CCOI is experiencing might be attractive. It would be wise to wait and see how the company finishes paying out acquisition costs before putting money down on wired connections in an increasingly wirelessly connected world.
Vodafone (VOD)
Focusing on the expansion of networks and reaching new customers is critical for the long-term survival of a telecom company, yet Vodafone (NASDAQ:VOD) might be overdoing it. Looking at its full-year summary of 2023, which the company counts as fiscal year 2024, its YOY revenue fell flat, dipping from 37.6 billion euros to 36.7 billion. While this is not a typical cause for alarm, the operating profit dipped 10.8 billion euros from FY23 to FY24.
This brings a new dynamic of consideration on why Vodafone’s cost of revenue increased so aggressively. It’s hard to find a direct answer from the company’s self-published reports. However, one reason could be rising costs across many of its European and African networks as inflation rocks the E.U. and South Africa continues to experience relative instability against criminal organizations. As a result, VOD remains among the 5G stocks to sell until its financial picture becomes clearer.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.