5G Stocks To Buy And Watch: Smartphones Rule Today But Enterprise Plays Will Kick In By Investors Business Daily
What 5G stocks will get a boost as 5G wireless networks are deployed and more smartphones hit the market? Look for management commentary on company earnings calls.https://imasdk.googleapis.com/js/core/bridge3.445.1_en.html#goog_604840396Volume 0%07:1107:3307:33
Many analysts view Apple (AAPL) as one of the best 5G stocks. Apple rolled out new 5G iPhones in October. In the December quarter, demand for 5G iPhones came in strongest in China. South Korea and China currently lead in 5G network coverage while Europe lags.
Led by T-Mobile US (TMUS), U.S. wireless firms are in the early stages of deploying 5G wireless services using high-performance, mid-band radio spectrum.
As expected, Verizon Communications (VZ) emerged as the highest bidder for 5G wireless spectrum in the telecom industry’s most expensive auction ever, followed by AT&T (T) and T-Mobile. Verizon spent over $45 billion, while AT&T spent $23.4 billion and T-Mobile $9.3 billion.
For network equipment makers, tower companies and others, the big question is how aggressively Verizon and AT&T will invest in 5G infrastructure after spending so much for 5G spectrum.
Meanwhile, a wide range of number of tech companies are building 5G ecosystems for private networks that deliver business-to-business services.
Telecom industry group 5G Americas forecasts that the addressable market to incorporate 5G into private business networks will jump sharply over the next five years, to $16.9 billion in 2025 from $1.9 billion in 2020.
How fast consumers will upgrade to 5G iPhones is still being debated among Wall Street analysts. Apple could be in the early stages of a so-called “supercycle.”
But Apple stock has dropped off the IBD Leaderboard. It’s a curated list of leading stocks that stand out on technical and fundamental metrics.
Samsung and Chinese Android-based smartphone makers are also big customers of 5G chip makers, such as Qualcomm (QCOM), Skyworks Solutions (SWKS), and Qorvo (QRVO).
Best 5G Stocks: China Smartphone Market Booms
While Skyworks notched a strong December quarter, Qualcomm and other chip makers came in with mixed results.
Qualcomm stock and Qorvo have been featured as the IBD Stock of the Day. Skyworks ranked No. 41 in the IBD 50 roster of fast-growing companies as of March 2.
Smartphones currently drive most demand for 5G chips.
“We estimate 5G unit shipments of 238 million in 2020, up meaningfully from 16 million in 2019 driven mostly by China (160 million in 2020),” said a Barclays report. “We model 525 million units in 2021 and 700 million in 2022.”
Mobile PCs are also being equipped with 5G wireless modems. Strategy Analytics estimates that 9.9 million laptop computers worldwide will have 5G modems by 2025, up from 700,000 in 2021.
Some view the best 5G stocks as semiconductor, network equipment, and infrastructure companies. The top 5G stocks will change as new applications emerge.
In addition, 5G enterprise applications in smart factories and other business uses are expected to come into view in 2021. Analysts say it make take a few years for 5G broadband services to homes to pose a threat to cable TV companies.
Further, 5G networks are expected to play a role in the expansion of “edge computing,” an evolution of cloud computing.
Meanwhile, shares in network gear maker Ericsson (ERIC) rose 35% in 2020. Ericsson stock popped on December quarter results and trades in a buy zone.
Chipmakers Expect Multiyear Boom
Semiconductor makers are among the best 5G stocks to invest in.
Aside from Qualcomm and Skyworks, Cirrus Logic (CRUS) and Analog Devices (ADI) also make chips built into smartphones. In China, Qualcomm faces more competition from local chipmaker MediaTek.
Some chipmakers sell into the 5G network market. They include Marvell Technology (MRVL), Broadcom (AVGO), Intel (INTC), Texas Instruments (TXN) and Analog Devices.
Meanwhile, Xilinx (XLNX) makes programmable chips built into prototype network gear.
Chip foundry Taiwan Semiconductor (TSM) has joined the IBD Leaderboard. According to Morgan Stanley, “TSMC is the sole supplier of Apple’s application processor, with around 20% revenue exposure to Apple iPhone.”
5G Stocks: Will Augmented Reality Take Off?
Meanwhile, Bank of America recently issued a report touting Snap (SNAP), Facebook (FB) and Alphabet‘s (GOOGL) YouTube as internet companies that will get a boost from faster 5G speeds and 5G smartphones.
“We expect 5G handset sales to ramp up in 2021, setting the stage for improved internet experiences,” the report said. “We think augmented reality could be a big theme in 2021 with Snap and Facebook well positioned to capitalize.”
YouTube will benefit from live video streaming, says BofA.
5G Wireless Stocks To Invest In
T-Mobile, meanwhile, has jumped ahead of Verizon and AT&T in deploying a 5G mobile network using mid-band spectrum.
T-Mobile’s mobile 5G network using 2.5 GHz, mid-band spectrum reached 106 million people in the U.S. at the end of 2020. T-Mobile forecasts that will increase to 100 million people by the end of 2020 and 200 million people by late 2021.
Verizon’s 5G network uses both lower-band and high-frequency “mmWave” airwaves. In a boost for Verizon, Apple’s new 5G iPhones utilize mmWave spectrum.
Verizon says its mmWave-based 5G wireless services, branded Ultrawideband, were available in parts of 64 cities at the end of 2020. Verizon aims to almost double that in 2021.
5G wireless networks will provide faster data speeds to consumer devices. Eventually, it’s expected that two-hour movies will be downloaded in 5 seconds vs. 6 minutes on a 4G network. Even so, the growth of some 5G stocks depends on the emergence of new consumer smartphone apps.
Verizon has teamed with Snap to develop augmented reality apps. Meanwhile, Ericsson says 5G-enabled augmented reality will take off in sports and gaming apps.
5G Stocks: Enterprise Apps Could Be Revenue Driver
Pundits expect 5G wireless to have a role in manufacturing automation, cloud gaming, autonomous vehicles, drones and remote health care services.
On the enterprise side, private 5G network services are expected to drive new business uses. Ericsson recently acquired Idaho-based Cradlepoint, targeting the 5G business-to-business market.
“Enterprise solutions could be the largest 5G revenue drivers, including factory and manufacturing, with telemedicine and health monitoring also new drivers,” Raymond James analyst Ric Prentiss said in a note.
Satellite TV broadcaster Dish Network (DISH) plans to start construction of a 5G network in late 2021. Analysts expect Dish Network to focus on the enterprise market.
At Jefferies, chip analyst Mark Lipacis expects augmented reality apps, higher resolution video and cloud gaming to drive early 5G consumer demand. 5G will contribute $1.9 billion in revenue to cloud gaming by 2024, estimates ABI Research.
In time, the breadth of 5G stocks will expand. The future of 5G wireless lies in the industrial Internet of Things, remote health care, drones and robotics, autonomous driving, smart cities and more.
Cybersecurity firm Palo Alto Networks (PANW) in November unveiled new security tools to secure 5G infrastructure and web-connected industrial devices. Palo Alto’s product offerings enable end-to-end protection of 5G networks.
Top 5G Stocks: Internet Companies To Gain From Faster Speeds
RBC Capital expects internet companies such as Amazon.com (NFLX) and Facebook to get a boost from faster 5G network speeds.
RBC Capital also expects upside for mobile apps that gobble up the most data on phones, such as Spotify (SPOT), Facebook’s Instagram, Snap and Pinterest (PINS).
Meanwhile, UBS also expects game makers Electronic Arts (EA), Activision Blizzard (ATVI) and Zynga (ZNGA) to get a boost from cloud-based gaming.
For many 5G stocks, the big opportunity lies in mobile network upgrades and the smartphone ecosystem. But the long-term opportunity for the best 5G stocks will be tied to new networks that blur the line between mobile and fixed-line infrastructure, analysts say.
5G Wireless: Higher Frequency Airwaves Require More Equipment
Initially, 5G networks will utilize higher frequency airwaves in urban areas. As a result, they require more equipment, more cell towers and more fiber-optic wiring than previous generations.
Makers of fiber-optic technologies also are part of the 5G wireless network supply chain. 5G networks will require “small cell” radio antennas, radio access network equipment as well as links to cloud computing infrastructure.
The global 5G radio access market will jump to $21 billion in 2024, up from less than $4 billion in 2019, research firm Omdia forecasts.
Further, 5G also is a long-term opportunity for network gear makers Ericsson, Nokia and Samsung. In early September, Samsung won a $6.65 billion 5G contract from Verizon. The deal dealt a blow to Nokia, a longtime supplier to Verizon.
However, some analysts say wireless carriers will shift spending from existing 4G networks to new 5G infrastructure. So overall capital spending may not increase as much as investors expect for 5G stocks.
Cellphone tower operators American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC) also could get a 5G boost, analysts say. Crown Castle will be a 5G infrastructure partner of Dish Network.
5G Networks Require Fiber-Optic Technology
5G networks will connect to fiber-optic networks for “long haul” purposes. That will provide reliability for emerging automotive, robotics and medical applications. Potential 5G stocks to buy include Corning (GLW), Ciena (CIEN), Acacia Communications (ACIA) and other fiber-optic players. Cisco Systems (CSCO) has agreed to buy Acacia.
Crown Castle makes “small-cell” radio antennas for 5G services in urban areas. The small-cell antennas — hung on utility poles or building rooftops — will require fiber-optic connections to local hubs. Local government approval, though, is required to expand 5G networks.
Rysavy Research projects that there will be 1 million U.S. outdoor small cells by 2028, up 10 times from today’s levels.
Keysight Technologies (KEYS) makes 5G network test gear. Keysight competes with Viavi Solutions (VIAV) and others in the 5G test gear market.
5G Wireless Targets Broadband To Homes
Some telecom firms aim to provide fixed 5G broadband to homes. That poses a long-term threat to cable TV companies such as Comcast (CMCSA) that dominate in broadband services.
Verizon has stated that it expects meaningful revenue from 5G wireless broadband services to homes by 2021. It’s waiting for more industry-standard equipment to be available before making a bigger marketing push in 5G broadband. T-Mobile also plans to roll out 5G broadband services to homes.
Naysayers warn that high-frequency airwaves are vulnerable to environmental conditions. As a result, broadband service quality may vary. Still, new technology is expected to improve the performance of high frequency airwaves for 5G broadband to homes.
Rysavy Research forecasts that within five years 5G broadband will emerge as a legitimate rival to cable’s high-speed internet services.
5G networks also will improve latency, the lag time it takes networks to respond. That’s crucial for applications such as autonomous driving, remote telemedicine and factory automation. 5G networks reduce latency to a few milliseconds from lags of 50 to several hundred milliseconds.
Edge computing deploys data processing, storage and networking close to sensors and where other data originate, near the “edge” of the network. The goal is to process and analyze data locally in real time rather than send it to faraway data centers in the internet cloud.
How 5G Wireless Will Change Cloud Computing
That should be a big opportunity for chipmakers Nvidia and Intel, some analysts say. Nvidia and Intel are the biggest providers of data center processors for cloud applications.
Mini data centers in neighborhoods will link to cloud-computing infrastructure. Nokia and Ericsson are developing 5G cloud gateways.
Verizon in late 2019 teamed with Amazon Web Services, part of Amazon.com (AMZN), to develop 5G edge computing services. More recently, it partnered with IBM.
“The advent of 5G should mean the rollout of many new technologies we certainly haven’t yet imagined,” said economist Ed Yardeni in a recent report. “To make them possible, the tech gurus are saying that cloud computing will move from a cloud server far away to equipment on the edge of a neighborhood’s network. Edge computing should continue to increase the speed of data transmission, but carriers will have to open their wallets to make it happen.”
Spending to enable edge computing — also called “multi-access edge computing,” or MEC — is forecast to increase from $2.7 billion in 2020 to $8.3 billion in 2025, according to Juniper Research.
With cloud software technology, pundits expect wireless firms to provide connections for drones and smart manufacturing. Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), Nokia and others aim to capitalize on edge computing.
