The 5G revolution isn’t just coming, it’s already here. However, many investors don’t seem to realize the opportunity that comes with it. With an increase in data speed comes an increase in capabilities. It’s going to cause a wave of upgrades, ranging from handsets to infrastructure. And with that, we want to look for 5G stocks to buy.
Switching to 5G should result in a burst of higher download speeds. It makes everything from streaming on the go to Internet of Things (IoT) devices more convenient. As a result, it’s going to exponentially increase the amount of data that is currently consumed.
While 5G technology was formally adopted in 2020, it’s really starting to hit its stride in 2021. That trend is only going to accelerate, particularly after the impact of the novel coronavirus.
Covid-19 created a dramatic acceleration in technology growth, and continued stimulus should also help. Thus, let’s look at seven 5G stocks now.
- Apple (NASDAQ:AAPL)
- Broadcom (NASDAQ:AVGO)
- Qualcomm (NASDAQ:QCOM)
- American Tower (NYSE:AMT)
- Verizon (NYSE:VZ)
- SkyWorks Solutions (NASDAQ:SWKS)
- Advanced Micro Devices (NASDAQ:AMD)
Now, let’s dive in and take a closer look at each one.
5G Stocks to Buy: Apple (AAPL)
We have to start the list with Apple. It doesn’t matter that the company doesn’t operate the cell towers or build the 5G chips inside our devices. What matters is that Apple is the world’s most successful smartphone operator.
Some may argue that other companies — like Samsung — belong at the top spot. I’m going with Apple, because it’s the most profitable. The company’s a financial juggernaut, commanding a $2.12 trillion market capitalization. Its profit and sales figures are so large it will make your head spin.
Yet, the stock has gone nowhere for several quarters, as the share price is trading around the same levels it was in August 2020.
Last fall, Apple introduced its first 5G compatible iPhone, paving the way for a huge adoption of the new technology. As its largest profit-generator, the iPhone plays a massive role in Apple’s success. It’s also the main gateway to the company’s Services revenue, which has shown tremendous growth in the past couple of years.
While Apple may not be creating the 5G revolution, its products are certainly helping to drive adoption of it. Look for this company to keep on winning in the long term too.
Broadcom (AVGO)
At one point, Broadcom was a major talking point. For whatever reason though, this name seems to have quietly slipped off investors’ radar. I think that’s a mistake.
There’s more to this name than its 3.1% dividend yield, which was much higher before the stock’s rally over the past 12 months. The company is set for a solid year, too. Analysts expect 12.5% revenue growth and 21% earnings growth.
Perhaps the best part? Shares trade at a reasonable valuation, going out at 17 times this year’s earnings estimates. The company trades at a reasonable 15 times trailing free cash flow as well, as Broadcom has done an excellent job building out long-term drivers for its business with strong margins.
The company began working on 5G capabilities years ago, realizing it would be a major driver in growth. It said, “The 5G build-out is expected to require an increase in capacity of the mobile network by a factor of ten or more along with a simultaneous tightening of key requirements for each segment of the network.”
So what did Broadcom do? Built out an end-to-end solution, of course. This is a name to keep on the radar.
5G Stocks to Buy: Qualcomm (QCOM)
If we want to talk about the “guts” of 5G capabilities, there’s perhaps no better company to look at than Qualcomm. As a major chip manufacturer in smartphones, Qualcomm’s technology is key to the 5G revolution.
The company focuses on a wide range of applications, too. That includes mobile broadband, but also mission-critical communications and the Internet of Things (IoT) thematic.
While Qualcomm has exposure to a plethora of industries, the current focus is on its 5G applications. From the company:
“We designed our Snapdragon 5G platforms to deliver a superior signal indoors and outdoors, with support for all key 5G technologies and frequencies, including mmWave and sub-6.”
Although Apple could eventually displace Qualcomm, for now, the latter is a major supplier to the former. Furthermore, consensus estimates call for almost 50% revenue growth this year, along with 85% earnings growth. Analysts also expect roughly double-digit top- and bottom-line growth next year.
American Tower (AMT)
The 5G revolution should also have American Tower on investors’ radar. Shares are currently hovering near multi-month highs, but are still below resistance and the one-year high near $270.
Currently paying a yield of about 2%, this REIT is also one to benefit from the 5G revolution. While upgrades equate to capital expenses — which impacts the next company on this list too — it also solidifies these companies for the future of communication.
Plus, upgrades equate to more revenue and ensure recurring revenue for the future. As more of the world adopts 5G technology, buys IoT devices and turns to streaming TV, American Tower will be the one to make that happen.
The company is building the foundation of the 5G revolution by operating so many of the vital towers and infrastructure that is needed.
5G Stocks to Buy: Verizon (VZ)
Verizon is a known dividend stud, kicking out a 4.4% yield. That’s considerable, even after the recent rise in bond yields. However, that’s one of Verizon’s more attractive qualities, given that it’s not exactly a high-growth stock.
Analysts expect 4.3% revenue growth this year and 2.1% growth next year. It’s similar on the earnings front, with estimates calling for 3.7% and 1.6% growth this year and next year, respectively.
But if there’s one thing investors can count on, it’s for customers to pay their phone bills. No one wants to lose their cell coverage and in Verizon’s case, the company takes great pride in its coverage.
With unlimited data offering including 5G coverage, it gives Verizon pricing power (not that it didn’t have pricing power before). But as the country moves toward 5G, it should put Verizon in a strong position to keep the revenue flowing in and the dividends flowing out.
SkyWorks Solutions (SWKS)
What does Skyworks Solutions do? It’s a “wireless semiconductor company, designs and manufactures radio frequency and complete semiconductor system solutions for mobile communications applications.”
As a supplier for Apple, Skyworks is riding the trend in smartphone upgrades, allowing 5G to help fuel its growth. That’s evident by consensus estimates too.
Analysts are looking for roughly 50% sales growth this year, outpaced only by analysts’ expectations of almost 70% earnings growth. Should it come to fruition, it will leave Skyworks stock trading at about 16 times this year’s earnings.
No debt and almost $1.5 billion in cash on its balance sheet also leaves Skyworks in a flexible position. However, that will have to change after its $2.75 billion acquisition of Silicon Labs’ infrastructure and automotive unit.
That said, the deal should help fuel the company’s longer term growth plans. Particularly as vehicle connectivity continues to increase — another driver of 5G adoption.
5G Stocks to Buy: Advanced Micro Devices (AMD)
While AMD is not typically thought of as a 5G stock, that could be changing with the company’s acquisition of Xilinx (NASDAQ:XLNX).
Assuming AMD is able to close the $35 billion deal, it will help broaden the company’s reach. The deal was approved by shareholders in April. In late May, AMD sought EU approval of the deal.
If it closes, Xilinx could help put AMD in a favorable 5G position.
The company is:
“The industry leader in field-programmable gate array (FPGA) chips. FPGA chips have flexible designs customers can reprogram and reconfigure even after they’ve been built. As new hardware is developed for 5G, FPGA chips’ adaptability makes them ideal for constructing the basic equipment to deploy 5G technology.”
Not to mention, AMD has very strong growth from its current business. Analysts expect revenue to climb 50% in 2021 and for earnings to jump 67%.
On the date of publication, Bret Kenwell held a long position in AMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
