The year 2020 is touted as one which will witness network experience transformation through widespread implementation of 5G. The fifth-generation network, which boasts faster download speeds thereby facilitating seamless transfer of data, has gained immense significance amid the coronavirus outbreak that has pushed the economy online.
Rapid proliferation of remote working, learning and health diagnosis amid lockdowns and shelter-in-place guidelines to curb the spread of the virus is exerting considerable stress on existing 4G networks.
In order to address the rising traffic, online video content providers like Netflix had to compromise on streaming quality, much to the frustration of consumers.
Moreover, growing demand for e-commerce, contactless delivery through drones and digital payment highlight the urgency for 5G network development.
Hence, it’s not surprising that the Trump administration’s latest $1-trillion stimulus plan has reportedly earmarked a fund for developing 5G infrastructure. The draft proposal shows the latest effort by the U.S. government to revive the coronavirus-ravaged economy.
Notably, all three major U.S. indices – the Dow Jones industrial, the S&P 500 and the Nasdaq – rallied following reports on Trump’s infrastructure stimulus plan.
5G Prospects Aplenty
5G is expected to attract extensive infrastructure spending from major economies. Notably, China and South Korea are already spearheading in terms of spending, while United States is expected to catch up this year.
As such, 5G infrastructure market is estimated to grow from $12.6 billion in 2020 to $44.9 billion by 2025, at a CAGR of 28.97%, per a Research and Markets report.
The solid growth in infrastructure spending bodes well for other 5G-related markets including chipset, equipment, network and edge computing. It is also expected to help in driving user base for 5G smartphone and apps.
Additionally, 5G is likely to boost proliferation of smart connected homes, devices, hospitals, factories and cities along with self-driving vehicles. Moreover, it is expected to facilitate rapid adoption of emerging applications like AR, VR and AI. Further, 5G enables advanced technologies in the IoT space, for instance, extending sensor driven IoT capabilities to drones, actuators and robots.
Here we pick five stocks that are well-poised to benefit from growing 5G spending as well as proliferation. All the five stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marvell Technology MRVL expects strong growth in 5G-related revenues in the second half of fiscal 2021, driven by continued deployment in Korea and the beginning of higher 5G adoption in Japan and other countries.
Notably, Marvell has inked partnerships with Nokia and Analog devices, involving its 5G solutions. Moreover, the acquisition of Avera Semiconductor has strengthened its portfolio offering, including 5G, data center, enterprise and automotive applications. The consensus mark for its fiscal 2021 earnings is pegged at 92 cents per share, having moved 8.2% north in the past 30 days.
Ericsson’s ERIC radio and transport solutions, with supporting services, help users evolve their telecom networks across generations to 5G — including new use cases like IoT, public safety, and fixed wireless access. Solid momentum for 5G in North America, Saudi Arabia and Japan has been acting as a tailwind for this company.
Ericsson currently has 93 commercial 5G agreements with operators (of which 51 are publicly stated) and includes 40 live 5G networks in four continents. The Zacks Consensus Estimate for its 2020 earnings is pegged at 52 cents per share, having been revised 2% upward in the past 30 days.
Ciena CIEN has augmented its Packet Networking portfolio with new Adaptive IP capabilities, coherent optics and purpose-built hardware platforms to enable service providers to capitalize on 5G. Notably, 5G needs to connect to fiber-optic networks to support emerging automotive, robotics and medical applications, which bodes well for Ciena.
The Zacks Consensus Estimate for Ciena’s fiscal 2020 earnings stands at $2.92 per share, having moved 13.6% north over the past 30 days.
NVIDIA NVDA is riding on the expansion of edge computing facilitated by the proliferation of 5G networks. Notably, in edge computing, data is processed and analysed locally, in real time, rather than being sent to faraway cloud data centers. NVIDIA’s data center processors are playing a key role in extending capabilities of edge computing.
Moreover, its GPUs have seen an uptick in adoption as telecom companies look for AI and deep learning to solve problems related to 5G network deployment as well as application. The consensus mark for the company’s fiscal 2020 earnings is pegged at $7.90 per share, having been raised 3.7% in the past 30 days.
T-Mobile US’ TMUS 600 MHz 5G now serves more than 215 million people, including inhabitants of Detroit and Columbus, while 50 million new T-Mobile devices have access to the 600 MHz LTE network. The company has deployed 5G sites in Philadelphia and New York City using Sprint’s 2.5 GHz mid-band spectrum on its 5G network.
The Sprint acquisition enables T-Mobile to deploy nationwide 5G at a much faster rate. Within six years, T-Mobile is expected to provide 5G to 99% of the U.S. population and average 5G speeds above 100 Mbps to 90% of the population. The Zacks Consensus Estimate for T-Mobile’s 2020 earnings has remained steady at $1.37 per share in the past 30 days.
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