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5 Stocks to Watch Amid the Continued 5G Boom

·6 min read
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5G is making steady progress in the global economy, especially in the United States. Per a PWC report, American mobile operators covered 75% of the country with this technology. The report estimates that 80% of the country would get access to 5G by July 2021. Notably, 5G uses mid-band spectrum and is expected to improve urban and suburban coverage. Looking at device penetration, 12% of mobile devices used by July will be 5G-enabled.

The pandemic accelerated digitization across several industry verticals and pent-up demand for better connectivity and higher computing power. 5G’s faster wireless Internet access, greater bandwidth and minimal delay make work easier and smoother than 4G, leading to a substantial rise in demand for Internet infrastructure. 5G can operate up to 100 times faster than the present 4G networks, enhancing the real-time data delivery speed and making technologies such as quantum computing operate with ease.

Hence, from industrial IoT to remote health care, drones and robotics, autonomous driving, smart cities, everything stands to benefit from 5G deployment. This in turn opens up opportunity for firms dealing in server processors, graphic cards, fiber-optic connections and mobile operators. Per a Grand View Research report, the global 5G services market size is estimated to reach $664.75 billion by 2028, at a CAGR of 46.2% from 2021. In the United States, the 5G market is anticipated to reach a worth of nearly $148 billion by 2028, with rising demand in machine-to-machine communications, energy & utility management, and smart mobility management.

Collaborations Boosting the 5G Space

Per a Juniper Research study, the global number of roaming subscribers using 5G services is expected to increase from 4.5 million in 2021 to 210 million in 2026. Hence, operators need to focus on increasing 5G roaming support to accommodate the rising demand for data when roaming over 5G networks. Several network operators are currently working in this field to ramp up services to match demand and this has led to new collaborations and funding in the 5G space.

On Jul 16, Ericsson inked an $8.3-billion 5G deal for five years with Verizon. It is the largest contract in Ericsson’s history. The agreement focuses on Ericsson’s latest 5G RAN technology for C-band, low-band and mmWave spectrum. Verizon will be using Ericsson's Radio system portfolio, Massive MIMO, Ericsson Spectrum Sharing and Ericsson Cloud RAN to deploy 5G across the country.

Weeks before Verizon’s deal with Ericsson, the wireless carrier had inked a deal with Mastercard, a partnership focused on 5G contactless payments for consumers and small- & medium-sized businesses. This collaboration aims to enable businesses to use modern payment technologies such as smartphones, turning them into cash registers, and enabling wearables like smart watches to make payments.

5 Stocks to Watch

5G is poised to become the lifeline of the Fourth Industrial Revolution (4IR), the unfolding age of digitalization. New technologies that are changing the face of manufacturing, from 3D printing, robotics, the industrial Internet of Things, to autonomous vehicles, will be needing ultra-reliable and low-latency data networks.???

Given such positives, we have shortlisted five stocks that engage in 5G deployment, Internet infrastructure, graphic cards and fiber-optic connections. Investors should keep a close watch on these stocks to make the most of the boom in this space.

Skyworks Solutions, Inc. SWKS manufactures and supplies chips to the top 5G smartphone original equipment manufacturers, including Apple, Samsung and Xiaomi. The company is scheduled to report third-quarter fiscal 2021 results on Jul 29, after the closing bell. Skyworks expects GAAP revenues of $1.075 billion to $1.125 billion, suggesting revenue growth of approximately 49% at the mid-point.

The company's expected earnings growth rate for the current quarter is 68.4% compared with the Zacks Semiconductors - Radio Frequency industry's projected earnings growth of 13.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.2% over the past 60 days. Skyworks Solutions currently sports a Zacks Rank #2 (Buy) and its shares have jumped 25.7% so far this year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Broadcom Inc. AVGO offers a 5G switching portfolio, designed to enable the deployment of end-to-end networks that consolidate all radio and fixed-line traffic onto a standard, Ethernet-based infrastructure. Since June 2020, the company has been working in collaboration with Nokia for the development of advanced semiconductor technologies. A must mention in this category is Nokia’s “5G Powered by ReefShark” portfolio.

This Zacks Rank #2 company belongs to the Zacks Electronics - Semiconductors industry and has a projected earnings growth of 24.5% for the current year. The Zacks Consensus Estimate for its current-year earnings has moved up 2.5% over the past 60 days. Broadcom’s shares have risen 9.1% so far this year.

American Tower Corporation AMT owns and operates over 214,000 telecom infrastructure sites worldwide. It offers Small Cells solution, that is a fiber-rich, 5G-ready infrastructure and easily supports radio frequency equipment specific to each wireless service provider. This REIT giant is poised to beat at earnings this season (scheduled to report on Jul 29, before market open), a Zacks Earnings ESP of +1.67%.

This Zacks Rank #2 company’s expected earnings growth rate for the current quarter is 12.3% compared with the Zacks REIT and Equity Trust - Other industry's projected earnings growth of 3.1%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.9% over the past 60 days. American Tower holds a Zacks Rank #2 and its shares have jumped 27% so far this year.

QUALCOMM Incorporated QCOM, a manufacturer of mobile application processors and baseband modems, is optimistic on 5G and connected device sales. It has mitigated supply shortfalls that have contributed to a global chip shortage and outperformed estimates for earnings and sales in its fiscal third quarter, with earnings of $1.92 per share and $8 billion in revenues.

Shares of Qualcomm has risen 2.6% in the past three months and the Zacks Consensus Estimate for its current-year earnings has moved up 0.1% over the past 60 days. The company's expected earnings growth rate for the current quarter is 86.2% compared with the Zacks Semiconductors - Radio Frequency industry's projected earnings growth of 28%. Qualcomm currently carries a Zacks Rank #3 (Hold).

Ciena Corporation CIEN offers WaveLogic 5 Extreme solution, delivering services at up to 800Gbps. It has also partnered with Lumea, an Australia-based energy and telecommunications services provider, to revamp the latter’s telco infrastructure with avant-garde technology. Ciena’s shares have gained 7.5% so far this year. This Zacks Rank #3 company belongs to the Zacks Fiber Optics industry and has a projected earnings growth of 56.7% for the next quarter. The Zacks Consensus Estimate for its current-year earnings has moved up 9.1% over the past 60 days.

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