Telecom stocks are under siege, and the enemy is SpaceX. Investors fear that the emergence of a well-capitalized SpaceX and its huge, fully reusable Starship will take over telecommunications, artificial intelligence, and maybe everything else. Elon Musk doesn't disagree: He recently said his SpaceX could be worth more than Earth.
Take a deep breath, folks. SpaceX will eventually launch a mobile telecom business, but not as soon as investors fear and not in the way investors imagine. There are still plenty of stocks in the sector that could pay off.
You wouldn't know it by the prices. Shares of Verizon Communications, AT&T, and T-Mobile US fell an average of 11% on Oct. 9, the day after SpaceX announced its purchase of low-band spectrum from Grain Management. The spectrum, which is good at penetrating obstacles such as buildings, brought SpaceX a step closer to offering mobile service, directly competing with the traditional industry.
Disruption fears have been a sector overhang for months, leaving the three stocks off an average of about 25% from their 52-week highs.
SpaceX is clearly a threat, but it will take Musk's rocket and AI company years and billions of dollars to fully develop its offering, according to Citi analyst Michael Rollins. SpaceX will need terrestrial infrastructure and maybe even a traditional wireless partner.
The most at risk appear to be cable companies that face competition on all fronts, from broadband to the home to mobile telecom. Wireless operators, by contrast, have the scale, experience, and spectrum to survive.
Here are six communications stocks that investors should look to when evaluating the future of wireless telecom. They just might defy the doomsayers.
TMUS
T-Mobile US already has a space-to-cell partnership with SpaceX. It has a lot more wireless spectrum, the pipes that carry wireless data, than SpaceX has amassed -- about 400 megahertz to SpaceX's 80. Earnings are expected to grow by about 24% annually for the coming two years, about 11 percentage points better than AT&T and 18 percentage points better than Verizon.
The shares are priced nicely, too. They trade at about 12.5 times expected earnings over the coming 12 months, the lowest valuation ratio in more than a decade. Things can always get worse, but shares look attractive at these levels.
T
AT&T reported better-than-expected third-quarter numbers on Wednesday. Still, shares fell 6.4%, reflecting the dour sentiment. But AT&T's results "bode well' for 2027 numbers, says Rollins. He recommended buying the dip after AT&T shares fell following SpaceX's low-band spectrum purchase. Rollins kept his Buy rating on shares after third-quarter earnings. His price target is $28, up nearly 25% from current levels. J.P. Morgan analyst Sebastiano Petti calls AT&T a "top pick" and has a price target of $31.
CCI
Crown Castle provides wireless telecom infrastructure.
It's a real estate investment trust that owns more than 40,000 cell towers. Crown and peers American Tower REIT and SBA Communications are the apartment buildings of the wireless communications world, renting rooms to Verizon and the like. SpaceX represents a new tenant, and more tenants mean more rent for Crown Castle. Bernstein analyst Madison Rezaei rates shares Outperform and has a $92 price target. As a REIT, it is sensitive to interest rates and has income -- a yield of 5.4%, to be exact.
VSAT
Viasat operates a network of roughly two dozen high-capacity satellites providing communications services to, among others, airlines and maritime businesses. It's seeing competition from Starlink, but is growing its business with military customers -- looking to wean off, well, Starlink. It also has a valuable portfolio of wireless spectrum.
William Blair analyst Louie DiPalma figures Viasat is worth about $20 billion, well above its enterprise value of about $14 billion. He rates the shares outperform.
ASTS
AST SpaceMobile is a critical partner for the traditional telecom industry as it wages war with SpaceX.
Sure, shares have been hammered in recent months, down almost 70% from a 52-week high north of $130 -- and down almost 30% since SpaceX announced its low-band spectrum purchase. But that drop was "misguided," says Deutsche Bank analyst Bryan Kraft. For starters, the SpaceX spectrum purchase doesn't put SpaceX in direct competition with AST. It aims to provide coverage in dead zones for the traditional industry. Kraft rates shares a Buy. Target share price: $93.
SPCX
SpaceX, yes, SpaceX -- and its 64 times price/earnings ratio -- is a good bet. Sure, most of the company's valuation is built on AI dreams. But the Starlink business ended the third quarter with 13.6 million subscribers and generated earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $3.5 billion, up 35% year over year. Morgan Stanley analyst Adam Jonas says SpaceX's communications business is worth $115 a share. That's about 70% of the current stock price, meaning that investors get the space and AI businesses at a discount. Jonas' target for the entire business: $300.
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