Communication services stocks have made a strong comeback this year, but are there still buying opportunities for Canadian investors? The sector includes advertising agencies, broadcasting, electronic gaming, entertainment, internet content, publishing, and telecom services. In 2022, the Morningstar Developed Markets Communication Services Index dropped by 31.04%, while the broader Morningstar Developed Markets Index fell by 11.93%. However, in 2023, the sector has rebounded, with global communication services stocks returning 30.41% over the past year.
Morningstar analysts believe there are still growth opportunities in the sector. Meta and Alphabet have led the way, but traditional telecom and media companies also show promise. In Canada, top telecom carriers like Rogers, BCE, and Telus are viewed favorably by analysts. These companies have Narrow Economic Moats, indicating competitive advantages, and strong capital allocation ratings. Quebecor, Rogers Communications, BCE Inc, and TELUS Corp are all undervalued and may present buying opportunities for investors.
Quebecor is a leading provider of fixed-line telecom services in Quebec, while Rogers Communications has invested in its wireless network to stay competitive. BCE is the largest Canadian broadband provider, with a growing fiber network. TELUS has focused on building a fiber network and improving its wireline business. Analysts expect these companies to continue performing well in the coming years. For Canadian investors looking for opportunities in the communication services sector, now may be a good time to consider investing in these companies.