We recently compiled a list of the 8 Best Communication Stocks To Buy According to Analysts.In this article, we are going to take a look at where Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) stands against the other communication stocks.
The communication sector seems to be performing well through this year as the sector ETFs are slightly outperforming the broader market. While XLC and VOX are up over 25% year-to-date as of October 17, the S&P has gained slightly over 23%. Chris Grisanti, chief market strategist at MAI Capital Management also sees significant opportunities in the tech and communications sector despite him being a value investor.
He told CNBC on October 17 that the economy appears to be in very strong shape, with positive earnings reports from financial companies. Economic indicators are looking solid, and the upcoming election could have a positive effect regardless of the outcome. Moving forward, the strongest earnings are likely to come from technology and communication stocks, despite them typically being outside value-focused investments.
Adapting to Consumer Behavior in Media and Telecom
According to PwC’s Media and Telecommunications: US Deals 2024 Midyear Outlook, media and telecommunications deal activity remained subdued due to high interest rates and uncertain regulations, with deal volumes declining despite a slight rebound in values in 1H 2024. Consumer preferences are shifting towards short-form, user-generated content platforms like TikTok, where influencers play a significant role in attracting brand partnerships. Streaming platforms are evolving through bundling and partnerships to manage rising content costs while improving subscriber retention.
AI, especially generative AI, is increasingly influencing content creation and ad tech, which are making campaigns more efficient and optimizing ad spending. Private equity investors are showing renewed interest, especially in consumer-focused deals, although regulatory obstacles and privacy concerns continue to complicate the market. As companies navigate these challenges, maintaining a strong consumer value proposition is crucial to retaining subscribers and driving growth.
Our Methodology
For this article, we identified over 40 communications services stocks with a market cap above $10 billion through the Finviz stock screener. Next, we narrowed our list to 8 stocks most favored by analysts. We listed the stocks in ascending order of their average price target upside as of October 17. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A powerful aerial view of the company's data center, exemplifying the digital services and informatics being offered.
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK)
Average Price Target Upside: 31.69%
Number of Hedge Fund Holders: 11
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), commonly known as Telkom Indonesia, is an Indonesian telecommunications conglomerate with a strong presence in the country's telecommunication and digital service industries.
It operates through several business segments, including digital connectivity, digital platforms, and digital services, and has expanded its reach beyond traditional telecom offerings into areas such as cloud computing, artificial intelligence, cybersecurity, and digital entertainment.
Telkom Indonesia’s (NYSE:TLK) financial performance in the first half of 2024 shows solid growth, driven by its focus on digital services. Total revenues reached Rp57.166 trillion (Indonesian Rp 1 = US$ 0.000065), representing a 29.9% year-over-year increase. Digital business contributed Rp39.536 trillion, growing 4.9% year-over-year and accounting for 89.9% of mobile revenue.
It also completed its integration with IndiHome's B2C segment, achieving Fixed-Mobile Convergence (FMC), which strengthened its market leadership in both fixed and mobile services. The customer base expanded to 159.9 million mobile users, while IndiHome B2C saw a significant boost in subscribers.
Telkom Indonesia (NYSE:TLK) also used significant Capex to improve digital infrastructure, including 4G and 5G BTS deployment and the construction of submarine cables and hyperscale data centers.
On October 11, Telkom Indonesia (NYSE:TLK) revealed that it is actively supporting Indonesia’s smart city trend and has covered over 500 cities and regencies. Its subsidiary, Telkomsel’s 4G service reaches 97% of the population with extensive network infrastructure. Collaboration with OTT and digital partners helps educate the public on future connectivity and content trends, aligning with the smart city movement. The company takes the 5th spot on our list of best communications spots.
Overall TLK ranks 5th on our list of the best communication stocks to buy according to analysts. While we acknowledge the potential of TLK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TLK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
