The pandemic has accelerated several technological trends like work-from-home, automation, online streaming and more, but all these highly depend on Internet and networking. While the 5G rollout was inevitable even before the global health scare, it is likely to see more widespread adoption through 2021. The transition of the wireless industry to 5G is rapid and it is expected that by 2025, the technology will be available globally, per a computerweekly.com report.
Higher performance and improved efficiency are the key characteristics of this technology. 5G is meant to deliver higher multi-Gbps peak data speeds, ultra-low latency, more reliability and massive network capacity, resulting in rise in users, increased availability and a more uniform user experience. Given the high demand for 5G wireless technology across the globe and rapid adoption, it is needless to say that this is one of the hottest investment trends this year.
U.S. Spectrum Auctions to Boost 5G
Rising government investments for the establishment of infrastructure is supporting 5G, and the United States has emerged as one of the hotspots for the technology. The 5G boom in America is more due to high adoption of technology paired with a robust network infrastructure. The Federal Communications Commission (“FCC”), on Mar 17, held an auction of 100 megahertz of mid-band spectrum in the 3.45–3.55 GHz band that can be used to facilitate 5G deployment across the United States. U.S. telecom companies shelled out a total of $81 billion in the auction, and bidding in Auction 110 is expected to begin in early October 2021. Telecom giant Verizon has committed $45 billion toward spectrum alone and the bid received in the auction was higher than expected and broke the previous FCC auction record of about $45 billion.
While major American companies are upgrading to this next-gen technology, customer adoption is also likely to pick up, as they need to trade in compatible devices for using this technology. It is not only the smartphone segment that will see a surge in demand. There is also a huge potential of 5G in industrial automation, self-driving car and smart cities.
Per a Market Study Report research, the global 5G infrastructure market was valued at more than $9.77 billion in 2019 and is estimated to reach $58.08 billion by 2026, at a CAGR of more than 29%. The global 5G services market size is expected to witness a CAGR of 46.2% by 2028, rising from $41.48 billion last year, according to a Grand View Research report.
Biden’s Infrastructure Bill in Focus
On Mar 24, President Joe Biden’s administration reported that Biden’s economic advisers are putting together a $3 trillion package to boost the economy. This will include efforts to reduce carbon emissions and narrow down economic inequality by providing a giant infrastructure plan. While the bill is still in the making, it would spend a huge amount on clean energy deployment and development of high-growth industries for the future like 5G telecommunications.
5 Stock Choices
Given the strong prospects of 5G wireless technology, we have shortlisted five stocks that are poised to grow from this heightened demand.
Skyworks Solutions, Inc. (SWKS) designs, develops, manufactures and markets proprietary semiconductor products, including intellectual property. The company’s expected earnings growth rate for the current year is 67.5% compared with the Zacks Semiconductors – Radio Frequency industry’s projected growth of 26.5%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 36.2% upward over the past 60 days.
Skyworks, which flaunts a Zacks Rank #1 (Strong Buy), makes radio-frequency chips that allow devices (self-driving cars, smartphones and more) to connect with the network.
Cambium Networks Corporation (CMBM) provides wireless broadband networking infrastructure products and solutions for network operators. This Zacks Rank #1 company offers 60 GHz millimeter wave solution that will deliver wireless Gigabit capacity and enable network operators to deliver fiber speeds without the labor, time and cost of deploying fiber infrastructure. The company’s expected earnings growth rate for the current year is 46.5% compared with the Zacks Wireless National industry’s projected growth of 3.4%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 18.9% upward over the past 60 days.
Ubiquiti Inc. (UI) develops technology platforms for high-capacity distributed Internet access, unified information technology and consumer electronics for professional, home, and personal use. This Zacks Rank #1 company’s expected earnings growth rate for the current year is 73.1% compared with the Zacks Wireless Equipment industry’s projected growth of 28.1%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 29.8% upward over the past 60 days.
Aviat Networks, Inc. (AVNW) designs, manufactures, and sells broadband wireless access base stations and customer premises equipment for fixed and mobile networks; and point-to-point digital microwave radio systems. The company’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Wireless Equipment industry’s projected growth of 28.1%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 47.5% upward over the past 60 days. Aviat Networks flaunts a Zacks Rank #1.
Telefonaktiebolaget LM Ericsson (ERIC) provides information and communications technology solutions for service providers. This company that belongs to the Zacks Wireless Equipment industry has an expected earnings growth rate 23.4% for the current year. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 9.7% upward over the past 60 days. Ericsson 5G platform enables service providers to offer new services for a whole range of new users and industries that includes smartphones to robots on factory floors requiring high-performing, highly reliable connectivity. Currently, the stock holds a Zacks Rank #2 (Buy).