Believe it or not, data can drive.
Well, not really.
But – in the same way that you drive from your home on a series of roads to get to the supermarket – data “drives” on a series of fiber optic cables and radio waves, known as the “internet backhaul,” to get from host servers to your smartphone, computer, or TV screen.
In this sense, the internet is really just a giant transportation network of data.
5G promises to forever change this transportation network.
It promises to make the data go 100-times faster… with a 100-fold increase in network capacity… and a 10-fold decrease in latency.
That means the roads on which data travels across the world are going to need a massive upgrade.
They’ll need to be wider, smoother, more robust, and just overall better.
So, before 5G coverage can become globally ubiquitous, the world needs to build a series of 5G superhighways on which data can travel at lightning speeds.
The construction of these 5G superhighways is expected to spark 150%+ growth in the internet backhaul market into 2027.
In today’s Trade of the Day, we will show you an explosive way to invest in the construction of 5G superhighways. Not by buying the fan-favorite 5G infrastructure stocks. Rather, by buying an overlooked, undervalued, small internet backhaul company that could soar several hundred percent in the early 2020s.
A Wireless Backhaul Leader with Explosive Profit Growth Potential
When it comes to the internet backhaul space, the “wired” part of the market gets all the attention and love on Wall Street.
I’m talking fiber optic cables, which run under the ground and are traditionally considered the safest, fastest, and most reliable way to transfer data.
Consequently, the world’s most important fiber companies are multi-billion dollar tech giants, like Lumentum ($5.3 billion market cap), Ciena ($6.4 billion), and Corning ($24.3 billion).
The “wireless” side of the internet backhaul market, on the other hand, is often overlooked by Wall Street.
That’s because this wireless side – which utilizes radio waves as opposed to fiber optic cables to transfer data – is traditionally considered less secure, less reliable and slower than wired backhaul.
The valuations in the market reflect this reality.
Wireless backhaul technology leader Ceragon (NASDAQ:CRNT) has a market cap of just $186 million.
But, for Ceragon, this reality is rapidly changing…
Ceragon has leveraged recent breakthrough advancements in its signature multi-core technology platform – which essentially reuses spectrum channels optimize speed – to turn its market-leading wireless backhaul solutions into offerings that, in many cases, have proven to be a more secure and reliable data transmission method than fiber.
Plus, Ceragon’s solutions are way cheaper, since they don’t require digging up the ground and installing expensive cables…
They are flexible and can be placed anywhere, especially in places where installing wired backhaul is nearly impossible…
And they cost less to maintain, with lower recurring expenses than fiber…
To be sure, fiber still beats Ceragon’s wireless solutions in most cases in terms of reliability and security.
But the fact that these two technologies are now super close in terms of performance across most settings – with Ceragon having the slight edge in some settings – and that Ceragon’s solutions are economically superior…
Well, that implies that as telecom infrastructure companies build out 5G superhighways over the next five years, they will likely deploy a lot of Ceragon’s wireless backhaul solutions.
Does that mean Ceragon could turn into a multi-billion-dollar company like its fiber optic peers?
Because wireless backhaul is cheaper than wired backhaul, Ceragon won’t ever have the huge revenue bases of Ciena or Corning.
But Ceragon does have a lower expense base, and that expense base is mostly fixed. Despite significant revenue volatility over the past few years, the operating expense base has consistently hovered around $20 million per quarter.
Thus, huge revenue growth on the back of 5G-driven demand over the next few years will power huge profit margin expansion, too, leading to doubly huge profit growth.
Indeed, I see Ceragon growing profits to $50 million or more by 2025, from a net loss of $2 million last year.
A simple 20X multiple on that implies a potential future valuation of $1 billion, or more.
So, if you’re looking for an explosive way to play the construction of 5G superhighways, skip the fan-favorite fiber-optic stocks. Instead, consider taking a position in the overlooked and undervalued Ceragon stock.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm.