The 5G revolution has been somewhat on the back burner in recent months as the novel coronavirus and the presidential election dominate the headlines. But long-term investors are looking for 5G stocks to buy that will deliver for years to come. Why? Connectivity is increasingly more important.
The rollout of a new 5G network will touch just about every industry under the sun from connected appliances, to automobiles, to the tech sector itself. That’s good news from an investment standpoint because it means there’s a catalyst for growth on the horizon. But picking a winner is more than just choosing stocks to buy out of a hat.
Instead, investors should be looking for companies with an edge in the 5G space, whether that be through superior components or their position within a particularly fortuitous industry.
With that in mind, here’s a look at eight 5G stocks that are about to take the world by storm.
- Advanced Micro Devices (NYSE:AMD)
- Electronic Arts (NYSE:EA)
- AT&T (NYSE:T)
- Apple (NASDAQ:AAPL)
- Nokia (NYSE:NOK)
- Skyworks Solutions (NASDAQ:SWKS)
- Qualcomm (NASDAQ:QCOM)
- Ciena (NYSE: CIEN)
5G Stocks to Buy: Advanced Micro Devices (AMD)
You can’t invest in 5G stocks without at least considering a chipmaker, and AMD stock fits the bill. While it isn’t necessarily the biggest semiconductor firm, it is arguably the one with the most promise.
The tech stock selloff has taken AMD stock markedly lower over the past few days, but that offers investors a buying opportunity. The firm will likely see demand for its 5G compatible chips rise exponentially over the next 12 months as a barrage of new devices hits the market.
Most importantly, AMD is well-positioned in the gaming space. It has components in Microsoft’s (NASDAQ:MSFT) Xbox console and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Stadia cloud gaming platform. With the cloud gaming space set to take off, AMD stock looks like a long-term winner.
Electronic Arts (EA)
It’s important to keep the gaming sector in mind when it comes to 5G stocks to buy. Why? Because cloud-based gaming will take off as connectivity improves. EA stock looks well-positioned to capitalize on this boom in cloud gaming, as the firm is working on its own cloud gaming platform, Project Atlas.
Notably, Project Atlas hasn’t offered much in the way of updates, but if there’s one thing we all learned about the streaming revolution over the past few years, it’s that content is king. Electronic Arts has that part of the equation nailed, so its cloud gaming platform is likely to take off once it’s ready.
EA is the name behind wildly popular esports franchises like FIFA and Madden NFL. Gaming enthusiasts love the titles, and with lockdowns driving more people to video games, the firm has likely picked up droves of new users. Throughout the pandemic, user numbers for both franchises have risen substantially.
5G Stocks to Buy: AT&T (T)
Another way to play the 5G trend is via carriers. As 5G devices hit the shelves, consumers are going to be looking for ways to use them. That means companies like AT&T that offer 5G connectivity will be in demand. A survey from Ribbon Communications found that telecoms are staring down a $150 billion opportunity — from gamers alone. The survey found that 95% of avid gamers are willing to pay more for an improved gaming experience. And importantly, 60% said they’d be willing to double their monthly bill.
That is huge. Of course, T stock isn’t a pure play on the 5G boom, but the firm offers investors a diversified approach that’s sure to benefit from faster connections.
The firm’s other assets look promising well into the future — particularly its streaming service, which could eventually come bundled together with the firm’s wireless packages.
Apple is another smart bet for investors looking to benefit from the 5G revolution. The tech titan has taken a hit recently, but again, that offers a buying opportunity for long-term investors.
AAPL stock is likely to see its share price rise in the coming months as its new iPhones are due to hit the shelves in October. The new iPhones will be 5G compatible and according to Raymond James’ Chris Caso, Apple appears to be expecting customers will snap them up.
“There’s no guarantee that current build plans will reflect what consumers will actually buy, but the build plans provide insight into Apple’s expectations… We’re assuming that Apple will build more aggressively on higher-priced [models] to make sure they are available for holiday purchases, and we expect that lower-priced [models] will likely sell out before Christmas.”
5G Stocks to Buy: Nokia (NOK)
Nokia is another stock whose share price the pandemic has pummeled. But like others, it could be a long-term winner in the 5G space for investors with a bit of patience. The firm managed to sign 83 commercial 5G deals and is planning to oversee 32 network deployments.
That should offer a huge bump to NOK stock in the coming months, especially once the pandemic starts to subside.
The tension between the U.S. and China helped push Huawei out of the 5G market in the U.S., but it will likely cause a ripple effect around the world. The White House’s allegations that China is using Huawei to gain intel has created mistrust for the firm. This has allowed Nokia and its competitors to swoop in and claim contracts that otherwise would have gone to Huawei.
The pandemic has caused setbacks for Nokia, but the firm’s second-quarter results showed that it managed to press forward with cost-cutting efforts. Its laser focus on growing its 5G business makes it a good bet for the future. NOK is one of the best 5G stocks to buy.
Skyworks Solutions (SWKS)
Skyworks is a radio frequency chipmaker whose chips are found everywhere. That means the 5G rollout will rely heavily on the firm’s products, offering investors a compelling reason to pick up SWKS stock.
One of the biggest reasons to like SWKS is the fact that Apple is its largest customer. The introduction of 5G handsets should offer SWKS a sizable bump in demand. Not only will Skyworks benefit from demand for the new iPhones, but the firm will also support networks as they kit out cell towers to cope with the faster connectivity.
Like many of the other firms on this list, SWKS has declined substantially over the past few days amid the tech selloff. But those losses are likely to reverse quickly once the dust settles and investors once again focus on the 5G revolution.
5G Stocks to Buy: Qualcomm (QCOM)
It’s impossible to talk about 5G stocks to buy without including QCOM stock. After winning a court case against the Federal Trade Commission (FTC), Qualcomm has become the leading 5G supplier. The firm designs chips, and its patents mean that virtually anyone who wants to connect to 5G will have to pay the piper.
QCOM stock is inexpensive compared to chipmakers like AMD. The firm trades at just 17 times its forward earnings. It offers investors a cheaper pure play on 5G connectivity.
While smartphones are QCOM’s bread and butter, the firm is likely to expand into other connected devices like cars and the internet of things.
While QCOM stock looks appealing as 5G grows, it’s important to consider the risks the firm is facing. Part of the reason Qualcomm isn’t as expensive as some of its peers is the fact that its business is likely to continue to slog through legal and regulatory battles for the foreseeable future. On top of that, it will collect lower royalty rates on 5G-only devices.
Like most of its peers, Ciena has been hurt by coronavirus slowdowns. Importantly, management believes the pandemic could still hurt revenue over the next few quarters. CIEN stock lost roughly 20% of its value in the wake of its Q3 results for that reason.
But for patient, long-term investors, CIEN stock represents a strong play in the 5G space. The coronavirus-related pain will be temporary, and the selloff is probably overdone.
While the Q3 results were poorly received, there’s a lot to like about CIEN stock. First of all, while the pandemic has caused a slump in enterprise demand for Ciena, the coronavirus has ultimately accelerated the move toward a more connected world. That’s a good thing for CIEN stock’s long-term growth case. The firm supports service providers as well as data center operators.
Not only that, but Ciena’s limited exposure to China makes it a good bet as the tension between the US and China is likely to persist well into the future.
On the date of publication, Laura Hoy held a long position in T, AMD and NOK.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.