2020 has thrown at us one test after another. Millions of people are suffering with the Covid-19 virus. Billions more cannot move about freely. Businesses are collapsing, and saddest of all, people are dying. These are the tangible negative effects of this crisis. There are thousands of other side effects that are hidden. Last year we expected that by now the transition to 5G would be in full swing. This is not the case and 5G stocks are in limbo because of it.
Last year the experts focused on faster connections as a must have. Yes, it is technically available as the providers tell us in their ads. But in reality, 5G is scarce and only in certain cities.
Few are complaining, though. 2020 came and shifted our priorities drastically. Not many care about the delays. We’ve had other things on our minds like the virus and the political unrest.
We’ve recently had good news on the vaccine front from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA). But we are still months away from when actual doses reach the people who need it. Even longer still for it to become available to everyone who wants it.
In addition, the political environment remains a mess in the U.S. and abroad. Needless to say that there is no shortage of reasons to worry.
But today’s point is simple. Amidst all the uncertainties we know one thing for sure: everybody wants 5G. Therefore, it’s only a matter of time before companies start profiting from it. 5G stocks are by definition a must own into 2021 and beyond. T-Mobile (NASDAQ:TMUS), for example, reported strong earnings suggesting that the industry is healthy.
5G Stocks to Own into 2021: Nokia (NOK)
Long are the hay days of Nokia stock. It is now but a sliver of its $60 dot-com highs, but this doesn’t mean that the opportunity here is any less important. So far this year NOK is keeping up with the S&P 500 to a degree. It is up 4.5% year-to-date but it is lagging badly behind the other two companies on this list.
Management hasn’t helped the stock much because Wall Street hated the earnings report. Nokia stock fell 25% on the headline. It spent the last two weeks repairing the damage.
This is not the first time this year that Nokia has needed to dig its way out of a hole. As a result, Nokia stock is firmly in a descending lower-high trend on many time frames. The bears are in control and it can’t find footing. There is a bit of good news because that last dip on earnings held above critical levels. The only other time it fell lower was during the March lows. Those conditions are not coming back so it is reasonable to expect more upside than downside from here.
Owning NOK stock for a recovery into 2021 is a viable thesis. Regardless of individual success, the 5G stocks collective should regain popularity as a high profile investment theme. For Nokia there will be resistance zones especially near $4.50 per share. But there should be room for a 30% upside into next June.
Skyworks Solutions (SWKS)
I charted SWKS stock a couple of weeks ago and so far price has gone exactly to plan. They had just reported earnings and investors were thrilled. The idea is for the bulls to form a base to use as a springboard for next year. The concept is still blossoming and can now get out from obscurity. The mad rush to the cloud theme is abating, so there is room for other concepts to grab some attention.
Fundamentally Skyworks is reasonable. It has a 28x price-to-earnings ratio, but more importantly, it’s not expensive. Investors there do not have a lot of hopium baked into the stock. The price-to-sales is 7x which is just peachy. The problem is in the lack of pizzazz currently on the books. Investors love to see sales growth headlines that is still to come for SWKS stock. Reports show that demand for 5G is healthy and that’s just the start.
If the work from anywhere theme is to persist we will need faster mobile tech. Running a full workstation purely on 4G won’t cut it for me. Software developers are constantly adding bells and whistles to their apps so we constantly need faster solutions. I use Alphabet’s (NASDAQ:GOOGL,NASDAQ:GOOG) Google and it seems like with every update my phone slows down a bit more. I need 5G when I am on the go.
ISGN stock has seen some action of late. They reported earnings in early November. The stock initially spiked to $11 per share but then flipped on a dime. The swoon lower took it to $8.27 per share. Luckily it found footing there and clawed back half of it. Now it sits mired in a descending short term trend and the bulls have some work to do.
They are off to a decent start with a double bottom this month. They can now set the stage to tackle the resistance between $10 and $11 per share. The knee-jerk spike reaction on earnings will be the biggest problem in the short term. It makes for an easy place for the shorts to try again.
The bulls will have to take that out and trigger a 50 cent mini at least. This way they can breakout from the technical bearish trend.
Long term, the stock has a good chance of recovery because they are delivering on promises. Management beat top and bottom line expectations this month. Fundamentally the stock is not bloated but it lacks the luster that investor seek in growth.
It is not a surprise that it carries a very low price-to-sales ratio. The bulls want to see results before they give INSG stock credit. We’ve recently heard that they may have a 5G deal with Verizon (NYSE:VZ). This would give them a good boost going into 2021.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.