There has been a lot of talk about fifth-generation (5G) telecom for many years now. But the truth is, a lot of that talk was more marketing than it was actual high-end product deployment.
A recent study found that one of the U.S.’ top mobile carriers’ 4G was actually faster on average than its nascent 5G network in the cities where it was deployed.
This is a big effort that is going to take time. That’s why it pays to invest in companies that will be there as mobile systems evolve to 5G.
It’s true, that once fully deployed 5G will be at least 100x faster than current 4G LTE technology. But the U.S. is a big country and 5G takes a different infrastructure than previous technologies.
There’s no doubt that there is a race to deploy 5G beyond just consumer demand. And these seven 5G stocks to buy now for growth are the quiet forces behind the macro move to next gen telecom.
- Ciena Corp (NYSE:CIEN)
- Telefon AB LM Ericsson (NASDAQ:ERIC)
- iQIYI (NASDAQ:IQ)
- Marvell Technology Group (NASDAQ:MRVL)
- Qualcomm (NASDAQ:QCOM)
- T-Mobile (NASDAQ:TMUS)
- Texas Instruments (NASDAQ:TXN)
In fact, each of these stocks have growth potential similar to that which investors can expect from the companies in Growth Investor. With that in mind, let’s take a deep dive into what makes each of these 5G stocks worth a look.
Ciena Corp (CIEN)
Much of the 5G deployment is going to be under the radar of most average people at this point. No new towers or structures will be dotting the landscape. At least not yet.
The first deployments have been in big cities where the population is dense and it’s easier to build out 5G systems because there’s plenty of fiber optic cable and lots of places for antennas.
5G uses a different antenna technology that’s easier to deploy in cities, where carriers get a bigger bang for the buck.
CIEN is a company that specializes in network and communications infrastructure, particularly optical networking. This is the kind of work that will build the backbone of 5G.
And CIEN has been a player in this space since 1992, when optical networking and fiber optic cable were more concepts than commercial technologies.
The stock is still a bargain because it has been overlooked in this massive tech mega-cap rally.
Telefon AB LM Ericsson (ERIC)
You may remember the dotcom days when this Swedish company was one of the leaders in mobile phones around the globe.
But it’s real claim to fame was its telecom infrastructure equipment. It helped wire the world during the first wave of mobility and has been a fixed line service company for decades as well.
Now, with the tech battle with China spread from the U.S. to Europe to India, ERIC is one of the few 5G equipment providers that isn’t tied to Chinese 5G technology. It’s what my InvestorPlace colleague Matt McCall would call a road builder on the “5G Highway.” That is a huge opportunity for ERIC.
The stock has been on a run in the past year and its price-to-earnings ratio is high, but its price-to-sales and price-to-book, both good indicators of intrinsic value, are still very reasonable. ERIC is a quiet player relative to other 5G stocks, but a key one.
While the 5G tech war continues to heat up, it doesn’t mean China is left out of the growth. It is simply building its domestic market demand using its own equipment, much like it has done for its other e-commerce platforms.
And given the fact that it has more than 1.4 billion people, its domestic audience is certainly enough to keep its tech firms healthy for a long time to come.
IQ is a spinoff of Baidu (NASDAQ:BIDU), the “Google of China.” BIDU currently owns about 56% of IQ.
Where BIDU focuses on search and marketing, IQ is one of the leading content streaming services in China. And 5G will make its platform even more attractive, especially with a parent like BIDU driving traffic its way.
There was an announcement in August about a U.S. Securities and Exchange Commission investigation regarding its user numbers from last year, but some of this may be trade war driven. Its recent numbers aren’t under question.
If you’re looking for a China play on 5G that trades in the U.S. market, IQ may be the way to go.
Marvell Technology Group (MRVL)
Another survivor of the great dotcom bubble, MRVL is a significant player in the design and manufacture of integrated circuits for computer infrastructure. And that means it’s a respected player in the 5G space now.
It has been all-in on 5G solutions since early 2019, announcing a broad array of solutions at the Mobile World Congress in Barcelona.
At a market cap of $26 billion it’s not a mega-player in this sector, but it does command a respectable position. And that’s why the stock has been moving with the bigger chip players in the space. Its fortunes rise, when their fortunes rise. While MRVL stock has plenty of promise as 5G stock, there are stocks with perhaps even greater growth potential from this movement. Take for example, the stock I call my “AI Master Key,” which will be at the forefront of numerous 5G-related innovations.
MRVL stock is up 48% year to date, but it’s still a decent bargain. However, its light won’t be under a bushel very much longer.
If there’s one company that has helped make the global mobile revolution grow, it’s QCOM.
Its chip sets have become the industry standard for mobile devices. And its development prowess is so significant that it makes more money from licensing its patents than it does actually producing chips.
A few years back it was sued by a number of nations, including China and the U.S. for its licensing contracts, which made it very difficult for other companies to compete with its technologies.
But those were settled and QCOM is back on top and it’s a leader in 5G infrastructure and chips for mobile phones.
Because it’s a mega-cap, it’s a bit expensive here. But the growth potential in 5G is big and it’s hard to get there without QCOM. Don’t forget, it still has a 2.3% dividend … all of this makes it one of the standout 5G stocks to buy today.
Having gone from mobile carrier outsider to the No. 2 mobile carrier in the U.S. by subscribers, TMUS is still just around half the size by market cap of its main rivals Verizon (NYSE:VZ) and AT&T (NYSE:T).
While its merger with Sprint helped launch TMUS into the top 3, the bigger carriers also lost subscribers to TMUS. Even after it reached its present size, TMUS likes to carry itself as the “un-carrier,” not as corporate and multi-layered as its competitors. That’s what makes it the sort of stock I like to focus on with Growth Investor.
Although T-Mobile has some streaming agreements with content companies like Netflix (NASDAQ:NFLX), it doesn’t aspire to get entangled in that business. At the end of the day, T-Mobile sticks to mobile. And that’s a good thing, given the challenges Verizon and AT&T have had with expanding their empires.
That decision continues to pay dividends.
What’s more, T-Mobile started building out a 5G network before its rivals and has continued to upgrade it. Now that it’s a major carrier, that will also motivate new subscribers.
And it remains a good value.
Texas Instruments (TXN)
For all its prowess, success and longevity in such a dynamic industry, TXN doesn’t garner a lot of headlines.
Much of that is because for all its value in the tech space, from computers to phones to networks, its equipment is doing the fundamental work rather than the sexy work. It doesn’t get a lot of ink because even though its chips and other devices are in many of the electronic products you use on a daily basis, they’re supporting players more than stars.
For example, in this white paper from TXN in 2019, it gives you a good overview of the implications of the new challenges of 5G components versus the current 4G system. It’s not exciting reading, but it’s important and thoughtful.
TXN stock is a little pricey here, but no more than many of its big tech peers. And it has a nearly 2.6% dividend, which shows it cares about its shareholders.