Apple (NASDAQ:AAPL) held its annual event on Oct. 13, where it unveiled new 5G iPhones and introduced 5G connectivity. As InvestorPlace.com readers would be well familiar, the arrival of 5G means the next generation of wireless infrastructure is here. Analysts and investors wonder if the company’s launch of the new line of iPhones will stimulate demand for shares of companies involved in the 5G technology. With that potential in mind, let’s look at three of the best 5G stocks prepared for the iPhone update.
Recent research led by Shancang Li of University of the West of England, U.K. highlights, “The existing 4G networks have been widely used in the Internet of Things (IoT) and is continuously evolving to match the needs of the future Internet of Things (IoT) applications. The 5G networks are expected to expand today’s IoT that can boost cellular operations, IoT security, and network challenges and driving the Internet future to the edge.”
A report by Kearney says, “Rapid and large-scale deployment of 5G would not only help the United States maintain its economic and technological edge globally, but it would also offer an opportunity to realize three other national objectives.” Therefore, both public and private enterprises realize the significant opportunities offered by 5G.
Nonetheless, given the health and economic realities of 2020, consumer uptake of the technology has been slow so far. In addition to costs related with an upgrade of phones, lack of wide coverage worldwide remains an issue. However, in the coming quarters, we are likely to see the technology increasingly become part of our lives. With that information, here are three of the best 5G stocks:
Best 5G Stocks: American Tower Corp (AMT)
52-week range: $174.32 – $272.20
Dividend yield: 1.88%
As a real estate investment trust (REIT), American Tower operates one of the largest independent portfolios of wireless communications broadcast towers. It has 181,000 communications sites; 41,000 of them are in the U.S. and the remainder are overseas.
Put another way, AMT stock is a 5G cell tower REIT that will benefit from the uptake in the technology. Its tenants typically sign long-term and non-cancellable contracts.
In late July, the company released Q2 results. Revenue came at 1.91 billion, an increase of 1.2% year over year. Net income increased 4% YoY to $446 million and resulted in a diluted earnings per share of $1, up 4.2%.
CEO Tom Bartlett cited, “We believe our existing diverse global portfolio, substantial liquidity and proven capital allocation strategy position us well to drive recurring, long-term growth and increasing return on invested capital as we execute our vision of making wireless communication possible everywhere.”
So far in the year, AMT stock is up over 5%. In the coming quarters, telecom carriers will have to upgrade their network infrastructure. As a result, analysts expect the group to expand the number of its towers both in the U.S. and elsewhere even further. Such growth would mean revenue increases. In addition, competition would find it increasingly difficult to enter the space. We believe an investment in the company could add up to both long-term growth and regular dividends.
Cisco Systems (CSCO)
52-week range: $32.40 – $50.28
Dividend yield: 3.61%
San Jose, California-based technology giant Cisco Systems needs little introduction. The group designs and markets a range of technologies and hardware across networking, security, IT and the cloud. Put another way, the company dominates the its products and services help clients transport data, voice and video traffic. It is No. 62 on the Fortune 500 list.
In August, Cisco reported Q4 and FY20 metrics. Revenue of $12.2 billion meant a decrease of 9% YoY. Adjusted EPS was 80 cents per share. EPS rose 22% thanks to a reduction in operating expenses by 9%. Management blamed the novel coronavirus pandemic for delayed or suspended customer orders. Sales for FY20 saw a 5% decline YoY.
Over the past decade, Cisco has, at times, found it difficult to grow its top line. And the share price has reflected that reality. Year to date, CSCO stock is down about 16%. Its forward price-to-earnings and price-to-book ratios stand at 12.99 and 3.45, respectively.
But in recent quarters, the company has been working on a transition from a hardware company to a software and cloud firm. As a result, over 50% of revenue now comes from software and services. And close to 80% of that is subscription-based.
Analysts expect 5G to change the company’s fortunes around. Its sales will possibly increase due to 5G wireless and data center upgrades. Ultimately, I believe CSCO stock offers value for long-term investors.
Corning (GLW)
52-week range: $17.44 – 35.83
Dividend yield: 2.53%
New York-headquartered Corning is one of the most important producers of specialty glass, ceramics and technologies for electronics and telecommunications industry. Its fiber optic equipment has wide use in electronics, automotive and life sciences. Its history goes back to 1851. The company has numerous research and development (R&D) centers worldwide.
In late July, the group released Q2 results. Revenue was $2.6 billion, showing an increase of 2%. EPS came at 25 cents and was up 25% sequentially from the previous quarter.
Investors were also pleased to learn that the “Corning Valor® Glass was selected by the U.S. Department of Health & Human Services and the Department of Defense to accelerate delivery of COVID-19 vaccines.”
Management sounded positive for future quarters. And analysts expect 5G will support sales in the company’s optical communications segment. Corning is working with other technology leaders, such as Intel (NASDAQ:INTC) to deliver indoor networks that are 5G ready.
Since the start of the year, GLW stock is up over 20%, which means the shares are in a bull market. In fact, they hit a multi-year high earlier in October. Any upcoming profit-taking in price would offer a better entry point for long-term investors.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.
