As 5G rolls out across the U.S., there will be plenty of exciting new possibilities. In turn, investors and consumers who take a look at 5G stocks can capitalize on the 5G revolution. So, in order to get a better informed perspective about the implications of this shift to 5G, we at InvestorPlace reached out to an expert in the field.
John Ballato, professor of materials science and engineering and Director of COMSET at Clemson University explained via email:
“The widespread deployment of fifth generation (5G) wireless technologies will feel like a new technological revolution given the data immediacy and capacity it enables. All the conveniences we’ve been expecting for years, such as ubiquitous autonomous transportation and HD movies and video anywhere and everywhere will become the norm. Even more important will be the availability and impact of telemedicine on global health and wellness, as well as the ability of larger international teams to collaborate in real time on the grand challenges facing the world.”
Thus, in order to capitalize on those massive changes here are six 5G stocks poised to appreciate:
- Qualcomm (NASDAQ:QCOM)
- Skyworks Solutions Inc. (NASDAQ:SWKS)
- Analog Devices (NASDAQ:ADI)
- Ericsson (NASDAQ:ERIC)
- Broadcom Inc. (NASDAQ:AVGO)
- American Tower Corporation (NYSE:AMT)
So, let’s dive in!
5G Stocks to Buy: Qualcomm (QCOM)
Qualcomm may not be the best 5G stock to buy for investors simply basing their analysis on price targets and current prices alone. From that perspective, QCOM stock doesn’t look stellar. Qualcomm shares currently trade near $110. And analysts’ median stock price target is $121. Should such appreciation come to be, most investors aren’t going to be interested in shares.
Nonetheless, this analysis misses the point. Qualcomm is going to be one of the most prominent and important players in America’s 5G rollout. Why? Because although QCOM is near historical highs, there is plenty of reason to believe it will rise higher still.
I particularly like QCOM stock from the perspective of its WACC vs. ROIC. This metric essentially balances capital costs against return on that capital. Investors want the capital they invest into a company in the form of stock purchased to return more money than it costs to employ. That said, Qualcomm’s ROIC is 14.35% and its WACC is 5.76%. Long story short, QCOM knows how to efficiently make money with the capital investors give to them.
Qualcomm’s dividend may also serve to attract investors. Although the company’s dividend yield is near a 5-year low of 2.3%, it seems fine. The dividend has been trending upward for several years and the pandemic is likely driving any temporary reduction. So, overall, there are more reasons to buy this stock than ignore it.
Skyworks Solutions (SWKS)
Skyworks Solutions isn’t a household name in the stock market, and it’s certainly not a company that garners headlines. However, it is worth strong consideration for investors looking to be on the right side of 5G growth.
Skyworks Solutions is one of the main chip providers for Apple (NASDAQ:APPL). In turn, the company generates around half of its revenues from Apple. So, given that 5G products from China are likely to continue being banned, this partnership will pay off.
But, there are many more reasons than simple trade tensions.
Collectively, trend lines tend to tell clear stories of companies. SWKS stock has been moving up over time for the past decade. And based on these few macro factors, Skyworks should continue that trend. Thus, as a buy and hold investment, there’s a lot to like.
For investors curious about its approach and 5G products, all is listed here.
5G Stocks to Buy: Analog Devices (ADI)
Analog Devices is a company that has clear tailwinds pushing it into a strong position in the 5G race. The company exceeded expectations and guidance in regards to EPS and revenue in its third-quarter earnings report.
ADI’s results were a continuation of a 5-year growth trend that should interest investors. And as a while, EPS, net income, revenue, gross margin and cash flow all rose during that period.
The company itself has been a long-time communications provider. In addition, Analog Devices has contributed to advancements from 2G onward and has a deep history in communications. Also, the company will be contributing to 5G across all industries and applications.
That said, analysts believe ADI stock to be a buy. In fact, of the 26 covering the stock, 16 rate it as a buy or strong buy with a median price of $138.40. ADI shares currently trade around $113. Thus, there’s plenty of room to run for ADI stock. And to me, this looks like a stable, safe bet as a 5G play.
Ericsson is in position to be one of the leading 5G network equipment providers. The Swedish telecommunications firm is competing for contracts against Huawei and Nokia (NYSE:NOK). However, Ericsson is in a stronger position because of the bans that several countries are enacting against Huawei. From that perspective the company should be a reasonably safe bet.
Moreover, Ericsson recently signed its 100th commercial 5G agreement. And currently, the company is operating in 56 live networks globally. That said, here is an interesting interactive tool to help potential investors visualize its footprint.
While the company does have plenty of operational issues to iron out, its 5G strategy should pay off. Investors shouldn’t expect it to rocket upward. Rather, this is a stock to buy and watch appreciate as its strategy bears fruit.
Analysts are pretty evenly split regarding ERIC stock as a buy or hold. Their median price doesn’t leave a lot of room for appreciation, but the consensus is upward movement.
5G Stocks to Buy: Broadcom (AVGO)
Broadcom is a semiconductor company based in San Jose with 19,000 employees. The company focuses on semiconductors, infrastructure software and IP licensing. The company cooperates with Google (NASDAQ:GOOGL) on many fronts. Broadcom co-designed their 4th generation TPU (tensor processing unit), and has begun working on Google’s 5th generation TPU.
The same TPUs power Google’s AI platform within its cloud business. These ASICs have grown from $50 million in revenue to $750 million since 2016. That said, investors should be very interested in such growth and the alliance with Google alone.
The company’s profitability metrics are strong and should propel it higher. Both Broadcom’s operating margin and net margin are above the 70th percentile in the semiconductor industry. Its revenue growth rate and 3-year EBITDA growth rate are well into the 80th percentile among industry peers. Analysts rate it a buy.
American Tower Corporation (AMT)
Although 5G investment has been slower than anticipated American Tower Corporation is a stock to really consider. Set up as a REIT, it is in position to profit from 5G. Barron’s agrees that buying tower REITs is a smart way to bet on 5G.
And although investment may have come slower than hoped, analysts still overwhelmingly agree AMT stock is a buy. At around $250 at this writing shares aren’t far off their 52-week high of $272. Yet, target prices range as high as $315, and once 5G is built out appreciation should occur.
The company’s steady dividend is attractive to income investors. Furthermore, REITs are a smart bet in this space with the other comparable company in the space being Crown Castle International (NYSE:CCI). Both are worth a look, but analysts do currently favor AMT stock.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.