5G boasts lightning speed that facilitates seamless transfer of data. This has gained immense significance amid the coronavirus outbreak.
Markedly, while 4G LTE-A (Long-Term Evolution Advanced) promises average speed of 15-50 Mbps, 5G aims at hitting average minimum speed of 50 Mbps. The 5G technology uses much higher radio frequencies compared with 4G that helps it to transfer data faster with reduced congestion and lower latency.
Rapid proliferation of remote working, learning and health diagnosis amid lockdowns and shelter-in-place guidelines to curb the spread of the virus has shown the limitations of 4G networks and the urgent need for 5G networks.
Moreover, growing demand for e-commerce, contactless delivery through drones and digital payment highlight the urgency for 5G network development. As such, the 5G infrastructure market is estimated to rise from $12.6 billion in 2020 to $44.9 billion by 2025, at a CAGR of 28.97%, per a Research and Markets report.
Work From Home to Drive 5G Rollout
The spike in new coronavirus cases has prompted search giant Google to push back its reopening of U.S. offices to Sep 7. Notably, tech giants like Google, Facebook FB and Twitter TWTR continue to offer employees the option of working from home through the remainder of the year.
Since the work-from-home trend is expected to continue for a significant stretch, network-intensive applications like video conferencing and cloud services are expected to witness high demand. 5G’s low latency compared with 4G is particularly helpful in this regard.
Hence, we expect 5G deployment to pick up pace in 2020. Moreover, solid growth in infrastructure spending bodes well for other 5G-related markets, including chipset, equipment, network and edge computing.
Per the latest Frost & Sullivan report, the 5G AI, memory and power amplifier semiconductor market is expected to witness a CAGR of 74.3% to reach $15.03 billion by 2025 from $536 million in 2019.
It is also expected to help in driving user base for 5G smartphone and apps. Ericsson ERIC expects 1.5 billion users or 40% of the global population to have access to a 5G network by 2024.
5G market is also expected to get a shot in the arm from the Trump administration’s latest $1-trillion stimulus plan that reportedly comprises a portion for 5G infrastructure development.
Here we pick five stocks that are well-poised to benefit from growing 5G spending and proliferation. All the five stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Year-to-date Performance
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Best Buys
NVIDIA’s NVDA recently-launched CloudXR SDK kit makes any 5G-enabled mobile device capable of tetherless XR streaming. This allows users to enjoy high-quality VR, AR and MR experiences.
Moreover, the chip maker is riding on expansion of edge computing facilitated by the proliferation of 5G networks. Notably, in edge computing, data is processed and analyzed locally, in real time, rather than being sent to faraway cloud data centers.
Further, its GPUs have seen an uptick in adoption as telecom companies look for AI and deep learning to solve problems related to 5G network deployment as well as application. The Zacks Consensus Estimate for the company’s fiscal 2020 earnings is pegged at $7.90 per share, having been raised 4.9% in the past 60 days.
Marvell Technology MRVL expects strong growth in 5G-related revenues in the second half of fiscal 2021, driven by continued deployment in Korea and the beginning of higher 5G adoption in Japan and other countries. In May, it launched Octeon networking chips to meet the throughput and latency demands of 5G telecom equipment makers.
Notably, Marvell has inked partnerships with Nokia, Samsung and Analog devices, involving its 5G solutions. Moreover, the acquisition of Avera Semiconductor has strengthened its portfolio offering, including 5G, data center, enterprise and automotive applications. The consensus mark for its fiscal 2021 earnings is pegged at 92 cents per share, having moved 8.2% up in the past 60 days.
Ciena CIEN has augmented its Packet Networking portfolio with new Adaptive IP capabilities, coherent optics and purpose-built hardware platforms to enable service providers to capitalize on 5G. Notably, 5G needs to connect to fiber-optic networks to support emerging automotive, robotics and medical applications, which bodes well for Ciena.
The Zacks Consensus Estimate for Ciena’s fiscal 2020 earnings stands at $2.92 per share, having moved 13.2% north over the past 60 days.
Ericsson’s radio and transport solutions, with supporting services, help users evolve their telecom networks across generations to 5G — including new use cases like IoT, public safety and fixed wireless access. The company recently achieved a significant milestone with the commercial availability of its Standalone 5G NR software for service providers in the 5G mid and low bands.
Ericsson currently has 93 commercial 5G agreements with operators (of which 51 are publicly stated), including 40 live 5G networks in four continents. The Zacks Consensus Estimate for its 2020 earnings has stayed at 51 cents per share in the past 60 days.
Qorvo QRVO is benefiting from the consistent solid demand for ultra-high band front-end modules owing to the launch of next-gen 5G smartphones. Notably, this Zacks Rank #2 company’s mid-high and ultra-high-band 5G solutions were adopted by Samsung to support its Galaxy S20 platform. Additionally, Qorvo’s Bulk Acoustic Wave-based multiplexers that enable advanced carrier aggregation are witnessing robust traction owing to their importance in next-gen higher data-rate applications.
The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $5.57 per share, having been revised 3.3% upward in the past 60 days.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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