Mobile Investing Trading
5G Companies Are Investing in Wireless Companies
July 24 2019 - 5G Stocks To Invest In Span Chipmakers Marvell And Xilinx, Apple, Verizon By Investors Business Daily
What 5G stocks will get an early boost? Look for management commentary on company earnings calls regarding traction. Telecom companies are in the early stages of building out 5G wireless networks.
Some 5G stocks are already profiting as U.S. wireless firms like Verizon Communications (VZ) and AT&T (T) conduct field trials. Japan, South Korea and China also are forging ahead in the technology.
Semiconductor makers head the list of 5G stocks to watch. Makers of fiber-optic technologies also are part of the 5G wireless network supply chain.
5G networks will require "small cell" radio antennas as well as links to cloud computing infrastructure. In time, the breadth of 5G stocks will expand. The future of the technology lies in the Internet of Things, autonomous vehicles, drones, remote health care and augmented reality phone apps.
Semiconductor Makers Are 'Arms Dealers' In Global 5G Race
The market for 5G semiconductors will boom to nearly $19 billion by 2022, up from $593 million last year, Bank of America/Merrill Lynch said in a March report.
"A wide range of semiconductor companies will be involved in 5G rollouts," the report said. "In terms of timing, first to be involved will include companies exposed to test/measurement and front-haul including Xilinx (XLNX), Analog Devices (ADI), Marvell Technology Group (MRVL), and Infineon."
In addition, infrastructure chip vendors such as Broadcom (AVGO) and Intel (INTC) will see upside as networks are built out, says the report. When 5G smartphones and mobile devices hit the market, among the semiconductor vendors to gain will be Qualcomm (QCOM), Broadcom, Skyworks Solutions (SWKS), and Qorvo (QRVO).
Apple Stock Upgraded On 5G IPhones
Qualcomm and Apple (AAPL) on April 16 announced a deal to dismiss all legal proceedings between the two companies worldwide. Qualcomm is expected to supply chips for Apple 5G iPhones rolled out in 2020.
5G apps could boost demand for Apple iPhones. Nearly 20% of current iPhone users are interested in upgrading to a 5G iPhone, said a Piper Jaffray survey.
Raymond James analyst Chris Caso upgraded Apple to out-perform on July 18 on views that a 5G upgrade cycle will kick in.
"Our recent checks suggest that Apple plans to bring 5G to a wider range of iPhone models (in 2020), which is different from their plan when they had intended to use Intel's modem," said Caso. "We feel that offering 5G at lower price points will drive a stronger product cycle, and early production plans tend to confirm that view."
Research firm Gartner expects more than 77 million 5G phones to be sold worldwide in 2020,with the total rising to 230 million units in 2021 and 840 million in 2023. By 2022, Cisco Systems (CSCO) estimates that 12% of all global mobile traffic will come from 5G connections.
5G Network Trials Pick Up Momentum
Xilinx makes programmable chips built into prototype network gear. While Xilinx's 5G-related communications unit revenue has boomed, though it has lost business from Chinese gear maker Huawei.
Keysight Technologies (KEYS) makes 5G network test gear. Keysight ranks No. 30 in the IBD 50 roster of fast-growing companies while Xilinx is No. 31.
Furthermore, 5G also is a long-run opportunity for network gear makers Ericsson (ERIC) and Nokia (NOK). Nokia, on its Jan. 30 earnings call, downplayed expectations for 2019.
The networks will use high-frequency radio waves and advanced radio antennas. But there's more to 5G stocks than wireless infrastructure.
5G Networks Require Fiber-Optic Technology
5G networks will connect to fiber-optic networks. 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.
Crown Castle (CCI) 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. Crown Castle has invested in cell-tower fiber network hookups.
Corning stock popped 10% in intraday trading on Jan. 29 after the company reported better-than-expected growth in its optical communications unit due to the build-out of 5G wireless networks. In April 2017, Corning signed a deal with Verizon to supply $1 billion in optical fiber wiring.
"The best way to invest in true 5G at this still early stage in our view is fiber/small cell service providers and others in the supply chain, although those building 5G handsets will benefit from a multiyear upgrade cycle as well," Cowen & Co. said in a May report.
Cowen sees growth in Crown Castle's small-cell business of about 20% in 2019.
However, Morgan Stanley says 5G deployment worldwide is going a bit slower than expected.
"With 5G network buildouts still in early days, we continue to be conservative with equipment expectations," said the Morgan Stanley report. "Spend has been slower to move from network core to edge, with fiber, optical growth still larger than radio/antenna. A transition (should) take place late this year." Morgan Stanley favors Corning as a 5G stock.
5G Stocks, China And Politics
The Trump administration wants the U.S. to beat China in commercializing services with the technology. That's bullish for 5G stocks. The administration is holding airwave auctions and aims to ease local regulations to speed up deployment.
The U.S. government is pressuring countries not to buy gear from Huawei, China's biggest networking gear maker. That should benefit Ericsson, Cisco, Samsung and other network gear makers.
Verizon, AT&T Target 5G Wireless
Verizon and AT&T are taking different routes to 5G as a moneymaker. New York-based Verizon is testing 5G broadband services to homes. It plans to expand deployment in late 2019.
However, it's uncertain whether Verizon can earn an acceptable return on capital from its 5G fixed wireless broadband service, MoffettNathanson analyst Craig Moffett says. Verizon's strategy relies too much on high-frequency airwaves, according to Moffett.
Verizon has said it does not expect meaningful revenue from 5G wireless broadband services to homes until 2021.
On the other hand, AT&T sees a quicker return on business services. Neither Verizon nor AT&T is expected to capture significant revenue from the technology in 2019. If regulators approve the merger of T-Mobile US (TMUS) and Sprint (S), those two carriers are expected to make a bigger push.
Cable TV Companies And 5G Networks
If Verizon announces a big expansion of its 5G broadband services to homes, look for cable stocks like Comcast (CMCSA) and Charter Communications (CHTR) to take a hit. Even so, a significant threat may not materialize until late 2021, analysts say. And, cable firms are ramping up faster landline broadband with the help of Intel.
5G And Cloud Computing
Mini data centers in neighborhoods will link to cloud-computing infrastructure. Nokia and Ericsson are developing 5G cloud gateways. 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 get on related edge computing.
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