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Trump's America Must Win Race Begins: 5 Potential Winners

Nalak Das

On Apr 12, President Donald Trump and the FCC (Federal Communications Commission) unveiled several initiatives to accelerate 5G (fifth generation) wireless network deployment in the United States. Trump said, “The race to 5G is on and America must win.” Although, Trump reiterated that 5G initiatives should be private-sector led, instead of a government developed shared network proposed earlier, national security will be the key issue for the government.

Advantage of 5G Wireless Network

The United States is progressing well to lead the world in 5G — the next generation of wireless connectivity — which will enable faster speeds and low latency wireless broadband services. Although 5G network is not likely to replace existing 4G standards on a large scale before 2020, several telecom behemoths are expected to launch 5G smartphones in 2019.

5G is widely believed to be smarter, faster and more efficient than 4G. It promises mobile data speeds that far outstrip the fastest home broadband network currently available to consumers. Data transmission speed of 5G network can go up to 100 Gbps, which will be 1,000 times faster than the 4G standard. As a result, an entire HD film can be downloaded in less than a second using 5G network.

The 2G wireless standard spurred the use of mobile phones instead of using landlines. The 3G wireless network enabled seamless Internet connectivity to mobile phone. 4G standard helped companies that thrive on mobile connectivity and online content. However, 5G wireless network is likely to boost high-tech AI-based products significantly.

5G Wireless and IoT Market Sizes

Per Reuters, global 5G wireless market size will reach $1,271 billion by 2025. The market will grow more than 49.1% over the 2018-2025 period. DELOITTE Global has predicted that 25 telecom operators will launch 5G in 2019 and 26 others will follow suite in 2020. About 20 vendors will launch 5G-enabled smartphones in 2019 and over 1 million 5G handsets are likely to be shifted this year.

Moreover, research firm IDC predicted that technology spending on IoT will reach $1.2 trillion by 2022. Research firm Bain estimated that the combined IoT market size will reach $520 billion in 2021 from $235 billion in 2017.

Per President Trump, 92 big U.S. markets will be ready to go 5G enabled by the end of this year. According to some estimate, U.S. wireless operators will invest $275 billion in 5G networks. This massive investment will create 3 million jobs and add $500 billion to the U.S. GDP.

Government Initiatives

The FCC auctioned 1,550 MHz spectrum for commercial use of 5G wireless network. Furthermore, the regulator is going to auction a massive 3,400 MHz of new spectrum in the Upper 37 GHz, 39 GHz and 47 GHz spectrum bands. Additionally, the FCC is set to create $20.4 billion “Rural Digital Opportunity fund,” to provide high-speed broadband connection to 4 million homes and business enterprises in rural areas.

Potential Winners

While several firms are lined up to take advantage of the significant market opportunity in 5G wireless network, five firms are likely to benefit the most.

The chart below shows price performance of these five stocks year to date.

Verizon Communications Inc. VZ has upped the ante against its rivals by aiming to launch the 5G Ultra Wideband network in Chicago and Minneapolis on Apr 11. As the company gears up to increase the tally of 5G Ultra Wideband mobility cities to 30 in 2019, it is offering an exclusive 5G moto mod by Motorola Solutions to power moto z3 – the world’s first 5G-enabled smartphone – to enable users to fully utilize the network features.

The company has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.17 for the current quarter.

AT&T Inc. T remains poised to benefit from the impending 5G boom. The telco giant has already introduced mobile 5G networks in parts of 12 cities and is further planning to add seven more cities to the tally in the first half of 2019. AT&T recently unveiled its 5G policy framework that will hinge on three pillars — mobile 5G, fixed wireless and edge computing. In order to have a seamless transition among Wi-Fi, LTE and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network in early 2020.

The company carries a Zacks Rank #3 and has an Earnings ESP of +0.49 for the current quarter.

Qualcomm Inc.  QCOM has been trying to retain its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. The company achieved a 5G data connection with the Snapdragon X50 5G modem chipset on 28GHz mmWave spectrum. Notably, Qualcomm Technologies has been at the forefront of driving Gigabit LTE and 5G in the industry.

The company carries a Zacks Rank #3 and has an Earnings ESP of +1.41 for the current quarter.

Cisco Systems Inc. CSCO is developing a Cloud-to-Client approach to 5G, unifying multivendor solutions into a single, standards-based architecture. It spans multicloud, IP routing, 5G core, service edge, access networks, IoT, and security. Cisco secures the wireless service provider from the cloud, to the network, to the client with its new 5G Security Architecture that builds upon the comprehensive portfolio of threat-centric solutions to securely enable 5G mobile networks.

The company holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intel Corp.’s INTC primary focus at the moment is data center and cloud, wherein it is doing everything possible to maintain market share and profitability. Supporting this is continued investments in the IoTand non-volatile memory/storage. The new Intel 5G Modem enables both sub-6Ghz and mmWave capabilities helping the industry’s ecosystem to develop and launch early connectivity solutions.

The company carries a Zacks Rank #3 and has an Earnings ESP of +0.17 for the current quarter.

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