Fiber 5G is undoubtedly shaping the future of communications. It is arguably the most popular topic of discussion for tech investors as the 5G market is estimated at $41.48 billion this year. 5G is expected to grow at a compound annual growth rate of 43.9% in the next seven years.
5G is primarily linked to the words mobile and wireless. However, the reality is that fiber optics are essentially the backbone of its data transport mechanism. In fact, a large part of the $144 billion 5G infrastructure investments in the past five years relates to fiber infrastructure deployments of 5G radios.
Several fiber optic stocks may prove to be solid growth options for investors when 5G fever truly takes over. Here are three high-performing fiber optic stocks that are potent winners in the 5G era.
Fiber Optic Stocks: Fabrinet (FN)
Fabrinet is a provider of optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers. It is headquartered in Thailand and was founded in 1999 by David Mitchell.
It is one of the hottest fiber optic stocks in the market, with a price-earnings ratio of 19.9 and an EPS of $3.19. The company has outperformed 66.86% of the industry in terms of earnings growth in the past year. Additionally, its free cash flows also outperformed over 50% of the industry. FN stock is trading at about $64. Consensus estimates point toward a price target of $68. That is only 5% lower than its highest stock price at $71.22.
Fabrinet is increasing research and development and expanding production facilities to gear up for the 5G storm. Its goal is to take advantage of its unique position in the Asia-Pacific market, which is expected to grow exponentially in terms of 5G consumption.
Lumentum Holdings (LITE)
Lumentum Holdings provides optical and photonic products for a range of end-market applications, including datacom, telecom, and commercial lasers. The company is headquartered in San Jose, California, and was founded in 2015.
Lumentom grew astronomically in the last five years and is among the top fiber stocks in the world. It currently boasts a P/E ratio of 56.34 and an EPS of $1.5. Earnings growth in the past year outperformed roughly 98% of the competition.
LITE stock price is an impressive at about $80 and fared well this year despite the novel coronavirus slowdown. Consensus price targets for the stock top $96.30. This is 3.3% higher than its highest stock price.
Lumentom has expanded to facilitate long-haul coherent networks, mobile backhaul and the next generation of data connectivity. The company recently unveiled its Datacom laser chip solutions for 5G fronthaul and hyperscale datacenter transceivers. I expect the company’s optical modules will provide an edge over competitors in reducing the costs of delivering 5G data.
Ciena Corp. (CIEN)
Cienna Corp. is one of America’s largest telecommunications networking equipment and software suppliers. It is headquartered in Hanover, Maryland, and considered the biggest player in optimal connectivity. The company was founded in 1992 by Patrick H Nettles.
CIEN stock gained 27% in the past six months and is the most resilient stock among the three fiber optic stocks discussed in the article. The company has an impressive P/E ratio of 25.98 and a healthy EPS at $2.08.
Moreover, it’s free cash flows rose tremendously in the past year to outperform 80.26% of the market. It is trading at about $53, which is roughly 7% lower than its highest stock price. Consensus price targets are estimated to surpass its high of $57.19 by 6%.
Cienna has been working on solutions to reduce network complexity and increase adaptability among different networks. This includes radios, data centers and other aspects required for a smooth transition from 4G to 5G.
The company’s unique approaches make use of efficient automation and advanced routing platforms for the delivery of highly differentiated 5G services.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. At the time of this article, he did hold a position in any of the aforementioned securities.