What 5G stocks will get a boost as 5G wireless networks are deployed and more smartphones hit the market? Look for management commentary on company earnings calls.
Many analysts view Apple (AAPL) as one of the best 5G stocks. However, some view the best 5G stocks as network equipment, infrastructure or cell tower companies.
Wireless service provider T-MobileUS (TMUS), meanwhile, has jumped ahead of Verizon Communications (VZ) and AT&T (T) in deploying a 5G network using high-performance “mid-band” radio spectrum.
5G Stocks: Network Security An Issue
Meanwhile, Qualcomm (QCOM) and Qorvo (QRVO) are among semiconductor 5G stocks to watch. They make chips built into smartphones. Qualcomm said 5G demand from Apple and Asian smartphone makers boosted its third-quarter earnings.
Qualcomm holds a Relative Strength Rating of 83 out of a possible 99. Qorvo owns a Relative Strength Rating of 87. The relative strength line of network gear marker Ericsson (ERIC) has been climbing.
Cybersecurity firm Palo Alto Networks (PANW) on Nov. 19 unveiled new 5G security tools to secure 5G infrastructure and web-connected industrial devices. Palo Alto’s product offerings enable end-to-end protection of 5G networks. Palo Alto stock trades just above a buy zone.
Apple stock is back on the IBD Leaderboard watch list. It’s a curated list of leading stocks that stand out on technical and fundamental metrics.
Apple on Oct. 13 rolled out four new iPhones that connect to 5G wireless networks.
Whether consumers rush to upgrade to the new iPhones remains a wild card for 5G stocks. Since Apple’s 5G launch, analysts have speculated over consumer demand by interpreting whether iPhone delivery wait times are getting longer or not, as well as other criteria.
According to a Goldman Sachs report, Apple management commentary on its third-quarter earnings call pointed toward a “weaker 5G iPhone cycle rather than the ‘Super Cycle’ expected by consensus.”
However, Analysys Mason, a market research and industry consulting group, forecasts that 5G’s share of handset connections in the U.S. will increase to 10% by the end of 2020.
Chip foundry Taiwan Semiconductor (TSM) has joined the Leaderboard. Its third-quarter earnings topped views as 5G chip production rose.
5G Wireless Stocks: T-Mobile Spectrum Advantage
When it reported third-quarter earnings, T-Mobile said its mobile 5G network using 2.5 GHz, mid-band spectrum now reaches 30 million people in the U.S. T-Mobile forecast that will increase to 100 million people by the end of 2020 and 200 million people by late 2021.
T-Mobile stock trades above a new buy point of 119.30.
Verizon’s 5G network uses both lower-band and high-frequency “mmWave” airwaves. In a boost for Verizon, Apple’s new 5G iPhones utilize mmWave spectrum.
Verizon says its mmWave-based 5G wireless services, branded Ultrawideband, will be available in parts of 60 cities by year end. Coverage could be spotty, analysts say.
5G wireless networks will provide faster data speeds to consumer devices. Eventually, it’s expected that two-hour movies will be downloaded in 5 seconds vs. 6 minutes on a 4G network. Even so, the growth of some 5G stocks depends on the emergence of new consumer smartphone apps.
“While it is still tough to conceive of the killer 5G consumer app that will drive 5G adoption, there is no shortage of people thinking about it,” said a Bank of America report.
But 5G enterprise applications in smart factories and other business uses are expected to come into view in 2021. Analysts say it make take a few years for 5G broadband services to homes to pose a threat to cable TV companies.
5G Stocks: South Korea, China Leaders In Adoption
South Korea and China jumped ahead of the U.S. in 5G wireless deployment while Europe has lagged.
Despite the coronavirus pandemic, global 5G smartphone sales will jump to 250 million in 2020, up 1,300%, forecasts Strategy Analytics.
China will account for most 5G smartphone sales in 2020. Samsung and Huawei lead in 5G smartphones shipped. Prices for 5G smartphones have been falling faster than expected in Asia.
Semiconductor makers are among the best 5G stocks to watch. While Nvidia (NVDA) belongs to the IBD 50 roster of growth stocks, 5G -related revenue is still ramping up for most chip makers.
Skyworks Solutions (SWKS), Cirrus Logic (CRUS)and Analog Devices (ADI) also make chips built into smartphones. According to IBD Stock Check-up, Cirrus Logic owns a Relative Strength Rating of 83 out of a possible 99.
Chipmakers Expect Multiyear Boom
In China, Qualcomm faces more competition from local chipmaker MediaTek.
Qualcomm aims to provide 5G development platforms. For example, it released tools to build artificial-intelligence-enabled robotics products with 5G connectivity.
Many chipmakers sell into the 5G network market. They include Marvell Technology (MRVL), Broadcom (AVGO), Intel (INTC), Texas Instruments (TXN) and Analog Devices.
Meanwhile, Xilinx (XLNX) makes programmable chips built into prototype network gear. But as 5G standards are approved, network gear makers will use fewer custom parts.
5G-related wireless network spending has dipped below 2020 forecasts amid the coronavirus emergency. 5G capital spending will increase to $23.8 billion in 2021 from $10.1 billion this year, estimates Analysys Mason.
5G Stocks: Enterprise Apps Could Be Revenue Driver
Pundits expect 5G wireless to have a role in manufacturing automation, cloud gaming, autonomous vehicles, drones and remote health care services.
On the enterprise side, private 5G network services are expected to drive new business uses. Ericsson recently acquired Idaho-based Cradlepoint, targeting the 5G enterprise market.
“Enterprise solutions could be the largest 5G revenue drivers, including factory and manufacturing, with telemedicine and health monitoring also new drivers,” said Raymond James analyst Ric Prentiss said in a note.
At Jefferies, chip analyst Mark Lipacis expects augmented reality apps, higher resolution video and cloud gaming to drive early 5G consumer demand. 5G will contribute $1.9 billion in revenue to cloud gaming by 2024, estimates ABI Research.
In time, the breadth of 5G stocks will expand. The future of 5G wireless lies in the industrial Internet of Things, remote health care, drones and robotics, autonomous driving, smart cities and more.
5G Stocks: Internet Companies To Gain From Faster Speeds
RBC Capital analyst Mark Mahaney expects internet companies such as Amazon.com (GOOGL) Google, Netflix (NFLX) and Facebook (FB) to get a boost from faster 5G network speeds.
He also expects upside for mobile apps that gobble up the most data on phones, such as Spotify (SPOT), Facebook’s Instagram, Snap (SNAP) and Pinterest (PINS).
Meanwhile, UBS also expects game makers Electronic Arts (EA), Activision Blizzard (ATVI) and Zynga (ZNGA) to get a boost from cloud-based gaming.
For many 5G stocks, the big opportunity lies in mobile network upgrades and the smartphone ecosystem. But the long-term opportunity for many 5G stocks will be tied to new networks that blur the line between mobile and fixed-line infrastructure, analysts say.
5G Networks: Higher Frequency Airwaves Require More Equipment
Making more midband spectrum available in the U.S. is key for 5G stocks, UBS says.
Initially, 5G networks will utilize higher frequency airwaves in urban areas. As a result, they require more equipment, more cell towers and more fiber-optic wiring than previous generations.
Makers of fiber-optic technologies also are part of the 5G wireless network supply chain. 5G networks will require “small cell” radio antennas, radio access network equipment as well as links to cloud computing infrastructure.
The global 5G radio access market will jump to $21 billion in 2024, up from less than $4 billion in 2019, forecasts research firm Omdia.
Further, 5G also is a long-term opportunity for network gear makers Ericsson, Nokia (NOK) and Samsung. In early September, Samsung won a $6.65 billion 5G contract from Verizon. The deal dealt a blow to Nokia, a longtime supplier to Verizon.
However, some analysts say wireless carriers will shift spending from existing 4G networks to new 5G infrastructure. So overall capital spending may not increase as much as investors expect for 5G stocks.
Cellphone tower operators American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC) also could get a 5G boost, analysts say.
5G Networks Require Fiber-Optic Technology
5G networks will connect to fiber-optic networks for “long haul” purposes. That will provide reliability for emerging automotive, robotics and medical applications. Potential 5G stocks to buy include Corning (GLW), Ciena (CIEN), Acacia Communications (ACIA) and other fiber-optic players. Cisco Systems (CSCO) has agreed to buy Acacia.
Crown Castle makes “small-cell” radio antennas for 5G services in urban areas. The small-cell antennas — hung on utility poles or building rooftops — will require fiber-optic connections to local hubs. Local government approval, though, is required to expand 5G networks.
Rysavy Research projects that there will be one million U.S. outdoor small cells by 2028, up ten times from today’s levels.
Keysight Technologies (KEYS) makes 5G network test gear. Keysight competes with Viavi Solutions (VIAV) and others in the 5G test gear market.
5G Wireless Targets Broadband To Homes
Some telecom firms aim to provide fixed 5G broadband to homes. That poses a long-term threat to cable TV companies such as Comcast (CMCSA) that dominate in broadband services.
Verizon has stated that it expects meaningful revenue from 5G wireless broadband services to homes by 2021. It’s waiting for more industry-standard equipment to be available before making a bigger marketing push in 5G broadband. T-Mobile also plans to roll out 5G broadband services to homes.
Naysayers warn that high-frequency airwaves are vulnerable to environmental conditions. As a result, broadband service quality may vary. Still, new technology is expected to improve the performance of high frequency airwaves for 5G broadband to homes.
Rysavy Research forecasts that within five years 5G broadband will emerge as a legitimate rival to the cable’s high-speed internet services.
How 5G Wireless Will Change Cloud Computing
5G networks also will improve latency, the lag time it takes networks to respond. That’s crucial for applications such as autonomous driving, remote telemedicine and factory automation. 5G networks reduce latency to a few milliseconds from lags of 50 to several hundred milliseconds.
Mini data centers in neighborhoods will link to cloud-computing infrastructure. Nokia and Ericsson are developing 5G cloud gateways.
5G networks are expected to play a role in the expansion of “edge computing,” an evolution of cloud computing. That should be a big opportunity for chipmakers Nvidia and Intel, some analysts say. Nvidia and Intel are the biggest providers of data center processors for cloud applications.
Edge computing deploys data processing, storage and networking close to sensors and where other data originate, near the “edge” of the network. The goal is to process and analyze data locally in real time rather than send it to faraway data centers in the internet cloud.
Verizon in late 2019 teamed with Amazon Web Services, part of Amazon.com (AMZN), to develop 5G edge computing services. More recently, it partnered with IBM.
With cloud software technology, pundits expect wireless firms to provide connections for drones and smart manufacturing. Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), Nokia and others aim to capitalize on edge computing.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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