The latest generation of wireless networking technology, 5G, has started entering our lives. In the U.S., 5G networks became operational last year as AT&T (NYSE:T), T-Mobile (NASDAQ:TMUS) and Verizon Communications (NYSE:VZ) started coverage. Following Apple’s (NASDAQ:AAPL) iPhone 12 event in October 2020, interest in 5G has been significant. Therefore, today we’ll introduce seven 5G stocks that might appeal to InvestorPlace.com readers.
“5G is here and happening… Currently, North East Asia is the region with the highest 5G subscription penetration. However, in 2026 it is estimated that North America will be the region with the highest share of 5G subscriptions at 80 percent… 5G subscriptions are forecast to reach 3.5 billion in 2026.”
Recent research by scholars from the Seoul National University of Science and Technology in South Korea and Georgia State University highlights, “5G network is considered to be one of the main pillars of various industries, including the Internet of Things (IoT), smart cities, virtual reality, and many more. Unlike previous network generations, 5G utilizes complex digital technologies.”
As a result, we are likely to hear increasingly more about the advantages of 5G as well as the challenges to be addressed. There are many global companies that are working to make 5G technologies a success. The Street regards Apple as one of the best 5G stocks for a buy-and-hold portfolio. However, there are many others that could bring sizeable gains for patient investors.
Here are the seven best opportunities in 5G stocks:
- Corning (NYSE:GLW)
- Crowdstrike (NASDAQ:CRWD)
- Facebook (NASDAQ:FB)
- Defiance Next Gen Connectivity ETF (NYSEARCA:FIVG)
- Qualcomm (NASDAQ:QCOM)
- Sony (NYSE:SNE)
- Taiwan Semiconductor Manufacturing (NYSE:TSM)
5G Stocks: Corning (GLW)
Corning is well known as one of the most important producers of specialty glass, ceramics and technologies for telecommunications and electronics industry. Its fiber optic equipment is widely used electronics, life sciences and the automotive industry. The New York-headquartered group, whose history goes back to 1851, operates several research and development (R&D) centers worldwide.
In late January, Corning announced robust Q4 and full-year metrics. Core sales of $3.3 billion was up 11% sequentially and 17% year-over-year. Core EPS came at 52 cents, up 21% sequentially and 13% year-over-year. Free cash flow for the quarter was $464 million. Analysts noted robust results across all segments. The Street expects 5G to increase revenue in the optical communications segment.
Chief Financial Officer Tony Tripeny said, “We expect year-over-year growth to accelerate in the first quarter of 2021. We expect core sales of $3.0 billion to $3.2 billion – compared with $2.5 billion in the first quarter last year – and EPS of $0.40 to $0.44, which is double last year’s first-quarter EPS at the low end of the range. ”
The company delivers indoor networks that are 5G ready. It also supplies glass and ceramic shields for Apple’s iPhone 12. Therefore, Corning will benefit from increased iPhone sales and 5G rollout. GLW stock’s forward P/E and P/S ratios stand at 19.16 and 2.57. Buy-and-hold investors could consider investing around $35.
The company is a cloud-based cybersecurity provider. Crowdstrike stock returned triple-digit gains in 2020 and now has a market capitalization of about $53 billion.
Protecting their online presence has become of utmost importance for most businesses. Digitalization trends worldwide have meant tailwinds for the industry. As 5G expands, the amount of data and information that needs to be kept safe will also increase. Thus, CRWD stock operates in a space that will see long-term secular growth.
In early December, the company announced strong Q3 earnings that showed the business has been booming. Revenue hit $232.5 million, a jump of 86% year-over-year. Crowdstrike had 1,186 net new subscription customers. Its customer base has expanded 85% in a year. Annual recurring revenue increased by 81% and stood at $907.4 million.
Non-GAAP net income was $18.6 million and non-GAAP EPS of 8 cents. A year ago, these metrics had been a loss of $13.4 million and a net loss of 7 cents.
CEO George Kurtz said, ““Our industry-leading cloud-native platform powered by Threat Graph enables us to rapidly bring new modules to market and drive customer adoption. With our expanding portfolio of capabilities, which includes three recently announced new modules and the addition of leading Zero Trust capabilities through our acquisition of Preempt Security, we believe we are well-positioned to continue our momentum and extend our Security Cloud leadership.”
CRWD stock’s forward P/E and P/S ratios of 909.09 and 67.34 show frothy valuation levels. A potential decline toward the $210 level would improve the margin of safety.
Menlo Park, California-based Facebook is the most important social networking company. It operates Facebook, Instagram, Messenger, WhatsApp and Oculus under its roof. User numbers on these platforms grow regularly. And the faster speed offered by 5G connectivity could benefit Facebook’s apps and platforms. Therefore, this mega-cap tech giant, along with other social medial stocks, are likely to benefit from the 5G revolution.
Facebook released Q4 metrics in late January. Top line growth was 33% year-over-year and revenue came at $28.07 billion. Net income of 11.22 billion meant an increase of 52.7%. Diluted EPS grew from $2.56 in Q4 2019 to $3.88. Free cash flow was $9.22 billion, an increase of 90.5% increase.
Chief Financial Officer Dave Wehner commented, “in the first half of 2021, we will be lapping a period of growth that was negatively impacted by reduced advertising demand during the early stages of the pandemic. As a result, we expect YoY growth rates in total revenue to remain stable or modestly accelerate sequentially in the first and second quarters of 2021. “
Management also expressed concern about the potential effect of European regulatory developments on its operations. Last year, the European Union requested that Facebook stop sharing data about EU-based users with the U.S. Such data-sharing restrictions could be “be expensive, restrictive and would make things increasingly complicated for The Social Network.”
Facebook stock’s forward P/E and P/S ratios are 24.03 and 9.05, respectively. In the case of short-term profit-taking in the tech sector, FB shares could come under pressure. A decline toward $250 would improve the risk/return profile.
5G stocks: Defiance Next Gen Connectivity ETF (FIVG)
The Defiance Next Gen Connectivity exchange-traded fund gives access to businesses that are drivers of 5G technologies. In addition to leading semiconductor names, firms include telecom gear makers, cloud computing companies and satellite-based communications groups. 5G is likely to connect equipment we use daily to the internet. Therefore, the fund includes a range of sectors.
Since its launch in March 2019, net assets have grown close to $1.2 billion. FIVG, which has 75 holdings, tracks the returns of the BlueStar Global 5G Communications Index,whose components are reviewed semi-annually. NXP Semiconductors (NASDAQ:NXPI), Analog Devices (NASDAQ:ADI), Ericsson, Qualcomm and Xilinx (NASDAQ:XLNX) lead the names in the roster. The top 10 names comprise about 40% of net assets.
So far in 2021, the ETF returned more than 6% and hit an all-time high in February. It’s expense ratio is 0.3%. Analysts expect 5G to become the standard, not just for smartphones, but for all data over the internet. Therefore, companies in a large number of sectors could benefit from the developments in the field. And FIVG is a well-diversified fund giving exposure to a wide range of stocks.
With its numerous patents and unique licensing model, Qualcomm is likely to be one of the most important names to ride the 5G wave. The wireless chip giant obtains royalties for millions of smartphone handsets worldwide.
Qualcomm released its 2021 Q1 financials on Feb. 3. Non-GAAP revenues went up by 63% year-over-year to reach $8.23 billion. Its bottom line figure more than doubled and hit $2.5 billion. Diluted EPS, which was 99 cents in Q1 2019, jumped to $2.17 in Q1 2021. Cash and equivalents were $7.08 million.
“We remain well positioned as the 5G ramp continues and we extend our core technology roadmap to adjacent industries,” CEO Steve Mollenkopf said. “We delivered an exceptional quarter, more than doubling earnings year-over-year due to strong 5G demand in handsets and growth in our RF front-end, automotive and IoT adjacencies, which drove record earnings in our chip business.”
In Q2 FY21, management expects $7.2-$8 billion in revenues. The non-GAAP diluted EPS guidance came at the$1.55 to $1.75 range. QCOM stock’s forward P/E and P/S ratios are 20.41 and 6.37, respectively. Long-term investors could consider buying the dips in the shares.
Tokyo-based Sony is a conglomerate consisting of five main business segments, including game and network services, music, pictures, electronics products and solutions, imaging and sensing solutions, and financial services.
Gaming is a crucial driver of SNE stock and is likely to benefit from 5G. Its latest PlayStation 5 puts the Japanese gamer master on many investors’ radar screen. Speed means next to no buffering or load time in these consoles, as well as superior image quality.
According to the quarterly metrics announced on Feb. 3, sales reached nearly 2.7 trillion JPY, an increase of 9% year-over-year. Net income was 371.9 million JPY, up 55.5% YoY. Diluted EPS came at 297.35 JPY, an increase of 62%.
In a recent press release CEO Kenichiro Yoshida stated, “Sony seeks to create new value through technology and as such, we have high expectations for AI, which can positively impact Sony’s existing businesses in electronics, image sensors and entertainment, and in creating new businesses. In addition, we believe AI has the potential to contribute to society in business domains that Sony pursues from a long-term perspective, such as health, personal finance, and in the evolution of next-generation mobility.”
SNE stock’s forward P/E and P/S ratios are 23.31 and 1.80, respectively. The Street believes entertainment companies like Sony stand to benefit from 5G technologies. A potential decline toward $100 would increase the attractiveness of the shares.
5G stocks: Taiwan Semiconductor Manufacturing (TSM)
Taiwan-based Taiwan Semiconductor Manufacturing is the world’s largest semiconductor foundry. It is also the first foundry to provide 5-nanometer production capabilities, regarded as the most advanced semiconductor process technology at present. Apple’s 5G iPhone relies on the new 5-nanometer node. TSM has more than 500 corporate customers.
On Jan. 14, TSM announced Q4 fiscal year 2020 results. Consolidated revenue of 361.53 billion NT$ meant increase of 14% year-over-year. Net income was 142.77 billion NT$, up 23% year-over-year. Diluted EPS was 5.51 NT$ (or 97 cents per ADR unit), an increase of 23% year-over-year.
“Moving into first quarter 2021, we expect our business to be supported by HPC-related demand, recovery in the automotive segment, and a milder smartphone seasonality than in recent years,” Chief Financial Officer Wendell Huang stated.
Considering further market recovery in automotive and 5G phone sectors, the future looks bright for TSM. However, so far in 2021, the shares have already returned more than 30%. As a result, TSM stock’s forward P/E and P/S ratios are 32.89 and 14.28. Interested investors could wait for a potential decline toward the $120 level. The world’s largest chip manufacturing outfit deserves a place on your radar screen.
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.