Everyone on Wall Street is talking about 5G these days… and it’s no wonder why.
After all, Qualcomm Inc. (NASDAQ:QCOM) estimates that 5G networks will generate a whopping $13.2 trillion in global sales activity by 2035.
In a Barron’s interview earlier this month, Qualcomm CEO Cristiano Amon noted that we are still in the early innings of the 5G game … something I’ve been telling you for a while.
That represents an enormous investment opportunity, not just for folks on Wall Street, but for individual investors as well.
While 5G is still in its deployment phase, Amon was optimistic that the majority of developed markets will have pervasive 5G coverage by the end of 2021.
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That means more people uploading, downloading and streaming more high-definition content than ever before.
Of course, that also means we’ll need 5G content delivery networks (CDNs) that can move all of that additional content quickly and securely.
That leads me to the stock I want to talk about today…
It’s both the world’s premier CDN provider and, behind the scenes, one of the world’s leading cloud-security firms.
More Content Means More Revenue
My latest 5G recommendation in Fry’s Investment Report runs the largest cloud delivery platform in the world.
It operates at a massive scale with more than 340,000 servers handling trillions of requests per day and more than 100 terabits per second of concurrent traffic around the clock. It carries about 30% of the entire world’s internet traffic.
These are enormous numbers.
The large majority of CDN revenue comes from its “edge” delivery solutions, which process video streaming and software downloads.
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A CDN is a geographically distributed collection of servers that work together to provide fast delivery of internet content.
It is like a network of data “minimarts” that operate closer to end users than the large web-hosting data warehouses known as “data centers.”
These minimarts don’t deliver everything you’d ever need, just everything you need right now.
This business is certain to continue growing, as 5G technology boosts data demand across numerous applications and end uses.
That should in turn boost the growth rate for this business segment above the relatively low rate management is currently forecasting.
But more importantly, the company’s dominant and steadily growing CDN platform provides a solid foundation for the sexier side of its corporate identity: cloud security.
Keeping 5G Secure
Data speed and data security have become inseparable processes. That’s why this company’s cybersecurity division has been growing so rapidly that it now accounts for one third of all revenues.
In effect, this is a fast-growing cybersecurity company in the guise of a slow-but-steadily growing CDN. It used to be that CDNs could focus on delivering content, while devoting minimal attention to IT security.
But times, and technologies, have changed. Data delivery and data security have become inseparably linked.
And the more that businesses and individuals migrate their technological lives to the cloud — and they’ll be doing even more of that once 5G is established — the greater the imperative to secure the data and apps that reside there.
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Furthermore, app security and fraud protection solutions delivered more than 20% of the company’s total revenues in 2020. Network security and related services kicked in another 12%.
Importantly, these cloud-security revenues are growing at a rapid clip — 33% per year over the last five years.
The reason why management is targeting a 20% compound annual growth rate (CAGR) for its security business over the next three to five years is obvious: Security attacks are increasing rapidly.
If it can achieve that goal, security revenues would double by the end of 2023 and account for roughly half the company’s total revenues.
Clearly, this 5G leader is on a new trajectory of long-term growth — growth that the 5G rollout could accelerate faster than most investors currently expect.
Of course, that has huge implications for the company’s share price, which I think can move much higher from current levels.
Regards,
Eric Fry
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NOTE: On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls —in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.
