Verizon Wins Defense Order Extension Contract: Will the Stock Benefit?

Nokia Corporation NOK recently announced that Fibertime has opted to deploy its cutting-edge fiber solution to bring high-speed broadband to underserved areas of South Africa. Through this collaboration, the leading African Internet service provider plans to connect up to 1.5 million new customers, utilizing Nokia’s Lightspan FX Optical Line Terminals (OLTs) and Wi-Fi 6-enabled Optical Network Terminals (ONTs).

Digging Deep Into NOK’s Deal

The initiative is centered around Fibertime’s flagship product, offering uncapped, unthrottled Internet for just R5 a day, an essential service for millions across the region. As part of the agreement, the company will deploy Nokia’s state-of-the-art Lightspan FX series of high-capacity access nodes, engineered to meet the demands of large-scale fiber deployments that deliver superior performance and scalability. With built-in Software-Defined Networking programmability, the solution ensures seamless Gigabit experiences for residential, mobile and business users.

Fibertime also aims to deploy 500,000 Nokia Wi-Fi 6-enabled ONTs, prioritizing homes in areas with limited Internet access, over the next three years. This large-scale deployment will be powered by Nokia's ONT Easystart, an automated solution designed to streamline the ONT activation process, ensuring faster and more efficient deployments. The fiber deployment will initially target key urban centers such as Cape Town, Johannesburg, Gqeberha, Mangaung and Stellenbosch, expanding gradually into more regions.

In addition to the fiber rollout, the partnership will also witness upgrades to the network, supported by Nokia’s Altiplano platform. This platform supports 10G XGS-PON technology and offers a complete suite of network management and automation functions to help streamline network management, improve scalability and ensure the long-term reliability of its infrastructure.

Does NOK Stand to Gain From the Deployment?

With the emergence of the smartphone market and subsequent usage of mobile broadband, user demand for coverage speed and quality has increased in recent times. Further, to maintain superior performance as traffic increases, there is also a continuous need for network tuning and optimization. Nokia’s expertise in mission-critical networks is well-established, with deployments across more than 2,600 leading enterprise customers in the transportation, energy, manufacturing, webscale and public sector segments worldwide.

This partnership between Nokia and Fibertime is a major step in addressing South Africa’s digital gap. With millions of homes still without access to affordable, high-quality broadband, the market opportunity is significant.

Nokia’s fiber solution, which includes both OLTs and ONTs, will help to create a semi-mobile network that can serve entire communities, providing broadband access beyond just homes and businesses. This approach will help bridge the digital divide and provide individuals with the tools to access education, healthcare and employment opportunities more easily.

These advancements are expected to generate incremental demand for Nokia’s solutions, leading to higher revenues. An improved financial performance is likely to propel the stock upward.

NOK’s Stock Price Performance

Shares of Nokia have gained 31% over the past year compared with the industry's growth of 51.5%.

NOK’s Zacks Rank and Key Picks

Nokia currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry have been discussed below.

Arista Networks, Inc. ANET sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last reported quarter, ANET delivered an earnings surprise of 14.83%. It provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 gigabit Ethernet switches and routers optimized for next-generation data center networks.

Workday Inc. WDAY carries a Zacks Rank #2 (Buy) at present. In the last reported quarter, it delivered an earnings surprise of 7.36%.

WDAY is a leading provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system, making it easier for organizations to provide analytical insights and decision support.

Ericsson ERIC carries a Zacks Rank #2 at present. In the last reported quarter, it delivered an earnings surprise of 22.22%. Ericsson is a leading provider of communication networks, telecom services and support solutions and is now expanding its role into an ICT (Information and Communications Technology) solutions provider.

Zacks Investment Research

Verizon Communications Inc. VZ recently activated more than 740 new Fixed Wireless Access (FWA) lines with the Tri-County Metropolitan Transportation District of Oregon (TriMet) to improve the mass transportation capabilities in the Portland metropolitan region. The superior bandwidth of FWA will help the transit agency with state-of-the-art connectivity and on-the-go traffic updates for enhanced bus, light rail, commuter rail and paratransit service in the region.

With fast, reliable and scalable wireless network connectivity leveraging Verizon’s 5G, FWA enables TriMet commuters to pay fares using their mobile wallet or contactless payment card. Moreover, the multimodal transportation service provider is pioneering a cloud-based Transit Signal Priority system that improves traffic flow efficiency without compromising on passenger safety while reducing carbon emissions.

VZ Rides on 5G Network Strength

Verizon plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions. Verizon’s 5G mobility service offers an unmatched experience that impacts industries as diverse as public safety, health care, retail and sports.

The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These are massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells. Verizon’s mmWave footprint delivers game-changing experiences for the densest parts of the network and offers highly predictable signal waves leading to greater efficiency and less interference for customers.

The low band spectrum (nationwide 700 MHz licenses and 850 MHz spectrum) continues to provide the best 4G LTE experience in the industry. It supports nationwide 5G service, giving customers in more than 2,700 markets access to 5G. Verizon’s mid-band spectrum assets include AWS, PCS, CBRS and C-band spectrum. The C-Band spectrum offers greater coverage for 5G networks and greater speeds than on low band spectrum and paves the way to provide differentiated service of 5G Ultra Wideband service to millions of customers.

VZ Focusing on Fiber Densification

Verizon has been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections. The company remains focused on making necessary capital expenditures due to the continued expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure.

Price Performance of VZ

Verizon has gained 12.9% over the past year compared with the industry’s growth of 39.1%, lagging peers like AT&T Inc. T and T-Mobile US Inc. TMUS.

One-Year Price Performance

NetApp, Inc. NTAP recently announced an enhanced partnership with Red Hat, a premium provider of open-source solutions, to transform enterprise application development and management within virtual environments. By combining NTAP’s expertise in intelligent data infrastructure with the Red Hat OpenShift platform, the initiative empowers businesses to effortlessly manage on-premises and hybrid multi-cloud environments.

Businesses today face mounting pressure to innovate quickly and develop applications that streamline operations and create better outcomes for their customers. Red Hat OpenShift, built on Kubernetes, is widely adopted by major global organizations to streamline application lifecycles, enhance productivity and facilitate innovation in areas like artificial intelligence (AI).

With this expanded collaboration, NTAP is improving its data infrastructure, making Red Hat OpenShift environments more cost-effective and flexible. This aids customers in better managing, securing and protecting Kubernetes container workloads and virtual applications.

Key Components of the Enhanced NetApp-Red Hat Integration

A key aspect of this collaboration is the integration of NetApp Trident, a Container Storage Interface driver, with Red Hat OpenShift. This integration allows Red Hat OpenShift and Red Hat OpenShift Virtualization users to leverage NetApp ONTAP’s advanced storage capabilities, such as replication and disaster recovery.

With Trident, Red Hat OpenShift operations teams and DevOps teams gain simplified access to high-performance, all-flash storage that maintains persistence, ensuring continuity even as virtual machines or containers are created, modified, or removed. The new version of Trident, available at no additional cost, brings integrated protection, migration and disaster recovery capabilities. Also, it now supports Google Cloud NetApp Volumes, providing more options for cloud storage.

Another significant enhancement is the release of validated designs for Red Hat OpenShift Virtualization and Red Hat OpenShift AI deployments on Cisco FlexPod, NetApp’s converged infrastructure solution. With these validated designs, enterprises have greater assurance that their virtualized and AI-driven workloads will run smoothly within a unified environment.

As part of this collaboration, the companies are delivering a new integration between Red Hat OpenShift Dedicated and Google Cloud NetApp Volumes. This integration provides Red Hat OpenShift Dedicated customers with a first-party storage option on Google Cloud. With Google Cloud NetApp Volumes, organizations can now use enterprise storage built on NetApp ONTAP directly in Google Cloud, offering a managed environment optimized for high availability and performance.

Strategic Alliances Driving NTAP’s Revenue Prospects

NTAP’s continuous efforts to strengthen its collaborations with leading names not only drive greater innovation within businesses but also unlock new revenue streams for the company. In October 2024, NTAP expanded its partnership with Google Cloud by integrating unified data storage and intelligent services into the Google Distributed Cloud architecture. Google Distributed Cloud harnesses the power of NetApp's intelligent data infrastructure, backed by ONTAP and StorageGRID solutions, to boost its services, including databases, AI and analytics.

In September 2024, the company announced an advancement in generative AI, combining its data management expertise with NVIDIA’s AI software and accelerated computing. The partnership aims to augment enterprise retrieval augmented generation, unlocking the power of next-gen agentic AI. Apart from these, NTAP has strengthened its collaboration with Amazon Web Services to improve customer experiences through accelerated generative AI initiatives, simplified processes and valuable CloudOps solutions.

NetApp is also gaining from continued strength in demand for flash portfolio. Driven by momentum across flash, block, AI and cloud storage solutions, management has raised its guidance for fiscal 2025. It now expects revenues in the range of $6.48–$6.68 billion compared with the previous band of $6.45–$6.65 billion.

San Jose, CA-based-NTAP assists enterprises in managing multiple cloud environments, adopting next-generation technologies like AI, Kubernetes and contemporary databases, and navigating the complexity brought about by the quick development of data and cloud usage.

NTAP’s Zacks Rank & Stock Price Performance

NTAP currently carries a Zacks Rank #2 (Buy). Shares of the company have gained 58.9% in the past year compared with the sub-industry's growth of 33.6%.

Other Stocks to Consider

Some other top-ranked stocks from the broader technology space are Workday Inc. WDAY, Arista Networks, Inc. ANET and InterDigital, Inc. IDCC. IDCC & ANET presently sport a Zacks Rank #1 (Strong Buy), whereas WDAY carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ANET provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 gigabit Ethernet switches and routers optimized for next-generation data center networks. In the last reported quarter, it delivered an earnings surprise of 7.36%.

IDCC is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks. It has a long-term growth expectation of 17.44%

WDAY is a leading provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system, making it easier for organizations to provide analytical insights and decision support. In the last reported quarter, it delivered an earnings surprise of 7.36%.

Zacks Investment Research

The Zacks Wireless Equipment industry is plagued by large-scale investments for seamless 5G migration, eroding profits due to escalated price wars, high customer inventory levels and inflated raw material costs. Moreover, a challenging macroeconomic environment, prolonged geopolitical conflicts and uncertain business conditions continue to weigh on margins. However, the transition to cloud and fiber network infrastructure upgrades should help the industry in the long run.

Despite short-term headwinds, Qualcomm Incorporated QCOM, Ericsson ERIC and InterDigital Inc. IDCC are likely to profit from a vast proliferation of IoT, increased fiber densification and a gradual shift to cloud services and 5G technology.

Industry Description

The Zacks Wireless Equipment industry primarily comprises companies providing various networking solutions, wireless telecom products and related services for wireless voice and data communications through scalable modular platforms. Their product portfolio encompasses integrated circuit devices (chips) and system software for wireless voice and data communications, analog and digital two-way radio, satellite telecommunications, wireless networking and signal processing and end-to-end enterprise mobility solutions. The firms also provide a broad range of routing, switching and security products, video surveillance and machine-to-machine communication components that secure VPN appliances, enable intrusion detection and thwart data theft. Some firms even provide electronic warfare, avionics, robotics, advanced communications and maritime systems to the defense industry.

What's Shaping the Future of the Wireless Equipment Industry?

Demand Erosion: Efforts to offset substantial capital expenditure for upgrading network infrastructure by raising fees have persistently reduced demand, as customers tend to switch to lower-priced alternatives. Moreover, the high technological obsolescence of most products has escalated operating costs, with steady investments in R&D becoming necessary to fend off competition. Due to a challenging macroeconomic environment and intense market volatility, high customer inventory levels pose another headwind for the companies.

Fiber, Cloud Networking Traction Act as Tailwinds: To maintain superior performance standards, there is a continuous need for network tuning and optimization, which creates demand for state-of-the-art wireless products and services. Moreover, a faster pace of 5G deployment is expected to augment the telecommunications industry's scalability, security and universal mobility and propel the wide proliferation of IoT. Expansion of fiber optic networks to support 4G LTE and 5G wireless standards, as well as wireline connections, are likely to act as tailwinds. The industry participants are facilitating its customers to move away from an economy-of-scale network operating model to demand-driven operations and seamlessly migrate to 5G by offering easy programmability and flexible automation through steady infrastructure investments. The exponential growth of cloud networking solutions is further resulting in increased storage and computing on a virtual plane. As both consumers and enterprises use the network, there is tremendous demand for quality networking equipment.

Short-Term Profitability Compromised: Although high infrastructure investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised. Margins are likely to be affected by the high cost of first-generation 5G products, U.S.-China trade tensions with the re-election of President Trump, the prolonged Russia-Ukraine war and the Middle-East tensions. Uncertainty regarding chip shortage (albeit to a lesser extent) and supply-chain disruptions leading to a dearth of essential fiber materials, shipping delays and scarcity of other raw materials due to geopolitical unrest are expected to affect the expansion and rollout of new broadband networks. Extended lead times for basic components are also likely to hurt the delivery schedule and escalate production costs.

Zacks Industry Rank Indicates Bearish Trends

The Zacks Wireless Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #161, which places it in the bottom 35% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few wireless equipment stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms S&P 500, Sector

The Zacks Wireless Equipment industry has outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector over the past year.

The industry has surged 52.3% over this period compared with the S&P 500 and sector’s growth of 36% and 40.3%, respectively.

One-Year Price Performance

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Ericsson (ERIC), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Ericsson currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here

Set to Beat the Market?

In order to see if ERIC is a promising momentum pick, let's examine some Momentum Style elements to see if this telecommunications equipment provider holds up.

A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.

For ERIC, shares are up 0.36% over the past week while the Zacks Wireless Equipment industry is down 1.06% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 9.59% compares favorably with the industry's 4.36% performance as well.

Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, shares of Ericsson have risen 15.91%, and are up 78.14% in the last year. On the other hand, the S&P 500 has only moved 13.08% and 38.58%, respectively.

Investors should also pay attention to ERIC's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. ERIC is currently averaging 18,930,158 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with ERIC.

Over the past two months, 3 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost ERIC's consensus estimate, increasing from $0.41 to $0.46 in the past 60 days. Looking at the next fiscal year, 2 estimates have moved upwards while there have been 1 downward revision in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that ERIC is a #2 (Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Ericsson on your short list.

Zacks Investment Research