The telecom industry is bouncing back, fueled by the growing demand for connectivity and Internet-of-Things (IoT) services. However, it continues to navigate a maze of challenges though, with geopolitical tensions and persistent inflation weighing down its recovery. Hence, the savvy investor will want to scrutinize telecom stocks to sell more closely.
Moreover, the telecom sector’s resilience is tested by supply chain and labor market headwinds, which continue pushing operational costs higher. While there are a myriad of opportunities for innovation and investment, the strength of the current headwinds suggests a potential portfolio reevaluation is necessary. Having said that, here are three telecom stocks to sell, offering little upside potential ahead.
Nokia (NOK)
It’s been more or less a start-stop story for telecommunications giant Nokia (NYSE:NOK) in the past few years. I remember covering the stock a few years ago when it was range-bound between $3 to $4. Fast-forward to mid-2024, and it’s still trading under $4, losing more than 23% of its value in the past three years.
2023 was a tough year for its business, with troubles deepening throughout last year and a dramatic drop in sales. The decline was intensified by adverse currency fluctuations and a rather lackluster North American market.
Moreover, losing its AT&T (NYSE:T) contract to its key competitor, Ericsson (OTCMKTS:ERIXF), further clouded its outlook. The development will likely majorly impact the firm’s operational performance, which has left much to be desired. Now its revenue is firmly in the negative, and investors are wary of a lack of major catalysts in taking the stock to new heights. This skepticism will likely impact NOK stock regaining its footing in the competitive landscape.
Vodafone Group (VOD)
Vodafone Group (NASDAQ:VOD) finds itself in a precarious financial landscape, marked by a major slowdown in its top-and-bottom-line growth. Group revenue has fallen in the negative at 2.5%, along with a worrying drop in its EBITDA growth, which stands at a negative 13.3%.
Moreover, its worrying financial position doubts its debt management capabilities and financial agility. It attracts a measly 4 on 10 rating from GuruFocus, with a negative 0.51 Altman Z score firmly in the distress zone.
Compounding these financial woes are its operational troubles. The firm is grappling with higher churn rates and faltering customer loyalty in key markets, including the U.K. and Germany.
Furthermore, the regulatory roadblocks weighing down the success of its proposed merger with Three UK (OTCMKTS:CKHUY) loom large, impacting its strategic initiatives. Hence, Vodafone is struggling to pull itself out of its current predicament, lagging behind its nimbler competitors, intensifying its woes in a hotly competitive telecom space.
8×8 (EGHT)
8×8 (NASDAQ:EGHT) is a cloud-based communications company that has seen better days. Once a high-growth business, its top-line growth has shrunk to a negative 2.05% compared to its 5-year average of 18.52%. In kick-starting a comeback, its management has done little to spur demand as they continue to employ belt-tightening measures to milk a profit. However, despite their best efforts, the company remains an unprofitable entity, a situation unlikely to change anytime soon.
Furthermore, the company is operating in a highly unconducive economic environment, where client budgets are likely to shrink, further impacting its top-line growth. Despite the improvements in cash flows, its sizeable debt load continues to threaten its financial stability. Its Altman Z Score is at a negative 0.29, which positions it firmly in the distress zone.
In turning things around, 8×8 is looking to employ AI to enhance its offerings, which effectively carries a ton of risks. However, it must maintain the rapid pace of AI advancements to avoid becoming more irrelevant in a fiercely competitive market.
On the date of publication, Muslim Farooque 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.
