When it comes to communications stocks, knowing which ones to avoid is at least as important as knowing which ones to buy. I would definitely avoid any of the streaming stocks in general, and I’d stay far away from the companies that own both cable channels and streaming channels. That’s because the competition is intense in streaming, and few streaming ventures are profitable at this point. And simultaneously, cord-cutting is sharply eroding cable companies’ profitability. This has led to the rise of undervalued communications stocks.
But with advertising appearing to make a comeback in the U.S. and Washington prepared to hand out tens of billions of dollars to internet providers, there are still plenty of good communication stocks to buy.
Here are three very undervalued communications stocks that are indeed worth purchasing at this point.
Alphabet (GOOG,GOOGL)
In line with my previous predictions, the overall U.S. ad sector is indeed rebounding as large companies’ worries about a recession (which never materialized and is unlikely to do so until at least 2025) fade. Indeed, according to Ad Age, ad spending is expected to climb 5% this year and 8.1% in 2924.
And of course, many large advertisers now spend a significant chunk of their ad budgets on Alphabet’s (NASDAQ:GOOG,NASDAQ:GOOGL) Google and YouTube websites. This makes it one of those undervalued communication stocks to buy.
Furthermore, investment bank Needham recently named Alphabet as one of the likely winners of AI. And Dan Ives, a well-respected analyst at investment bank Wedbush, believes that Google Cloud will also be boosted by the AI phenomenon.
GOOG stock is changing hands at a very low forward price-earnings ratio of 20.4.
SiriusXM (SIRI)
I believe that SiriusXM (NASDAQ:SIRI) is well-positioned to benefit from a few powerful, important trends, including the strengthening ad market, the increasing popularity of podcasts, rising U.S. auto sales, and the work-from-home trend.
Sirius owns many podcasts, and the industry is now worth $23.56 billion. The number of podcast listeners is expected to climb to 504.9 million this year, up from 464.7 million this year.
I believe that the work-from-home trend will also help Sirius. I work from home five days per week and frequently listen to Sirius while working, and I think that many other Americans will start doing the same.
U.S. auto sales were expected to jump 15.4% in August versus the same period a year earlier.
Finally, Sirius’ forward price-earnings ratio is a very low 13, while it has a sizable dividend yield of 2.3%.
Verizon (VZ)
Verizon (NYSE:VZ) will benefit, sooner or later, from a large amount of cash from Washington. In June, “The White House divvied up $42 billion among the nation’s 50 states and U.S. territories to make access to high-speed broadband universal by 2030.”
Those funds will enable Verizon to recruit many more broadband internet customers.
Another initiative that is likely helping the company to add more broadband customers is its low-cost 5G internet plans. Indeed, last quarter, VZ added a net total of over 400,000 new broadband customers. that was the firm’s ” third consecutive quarter with more than 400,000 net (broadband) adds.”
Over time, I believe that VZ will increase the amount it charges its new broadband customers, lifting its top and bottom lines.
On Aug. 29, Citi (NYSE:C) upgraded VZ stock to “buy,” citing the “stabilization” of competition in the wireless sector, an attractive valuation,. and improving free cash flows.
Speaking of valuation, VZ stock is changing hands at a very low forward price-earnings ratio of seven, while it offers a huge dividend yield of 7.7%.
On the date of publication, Larry Ramer did not hold (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.