Commercial 5G rollouts have already begun in the United States and are expected to transform how the internet is used . The requirement of fast and stable network connectivity for increasing internet-usage-heavy jobs in the ‘new normal’ is driving the uptake of the 5G standard and its equipment.
Furthermore, supportive bipartisan policies to combat the global semiconductor shortage have put the United States at the forefront of the global 5G race. The 5G services market is projected to grow at a 29.4% CAGR to $249.2 billion by 2026.
Given this backdrop, we believe under-the-radar 5G stocks Keysight Technologies, Inc. (KEYS), Ribbon Communications Inc. (RBBN), and Gilat Satellite Networks Ltd. (GILT) are expected to deliver phenomenal gains in the coming months.
Keysight Technologies, Inc. (KEYS)
KEYS is a developer and seller of device test solutions. The Santa Rosa, Calif., company functions mainly through two broad segments. Its Communications Solutions Group Segment provides electronic design automation (EDA) and other designs and applications, and its Electronic Industrial Solutions Group Segment provides tools and their usage solutions for a range of products. The company supplies 5G test solutions from the device’s early development stages to its optimization phase.
On August 25, H3C, a digital infrastructure provider, selected Keysight solutions for peripheral component interface express (PCIe) compliance validation and 5G small cell performance testing to capture opportunities in data compute and 5G markets. Its selection demonstrates the company’s technological prowess and its market reach.
KEYS joined Google Cloud’s Partner initiative on August 24. The initiative is to enable a cloud-centric 5G ecosystem to connect a software-driven infrastructure from the edge of the radio access network (RAN) to the core. KEYS solutions across wireless and wireline technologies are expected to enable hyperscalers and mobile operators to create unified, heterogeneous networks that support a wide range of applications and thus should be widely in demand.
On August 16, KEYS launched the Keysight Nemo 5G RAN Analytics software that optimizes user experiences on 5G networks by providing data management solutions based on Artificial Intelligence (AI) and Machine Learning (ML). In addition, the software effortlessly operates with other Keysight Nemo Solutions to give users a heightened experience. This product should allow the company to strengthen its position in the 5G space.
In its fiscal third quarter, ended July 31, KEYS’ orders increased 22.8% year-over-year to $1.31 billion, while its revenue improved 23.2% from the same period last year to $1.25 billion. Its non-GAAP net income rose 26.5% from the prior-year quarter to $286 million. And its non-GAAP EPS came in at $1.54, indicating a 29.4% increase year-over-year.
A $1.64 consensus EPS estimate for the current quarter (ending October 2021) indicates a 1.2% increase year-over-year. Likewise, the $1.27 billion consensus revenue estimate for the current quarter reflects a 3.9% increase from the same period last year. In addition, KEYS has topped the Street’s EPS estimates in all four trailing quarters. The stock has gained 79.2% in price in the last year and 35.3% year-to-date.
It’s no surprise that KEYS has an overall B rating, which translates to a Buy in our POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
KEYS has an A Quality grade and a Stability and Sentiment grade of B. Of the 45 stocks in the B-rated Technology – Electronics industry, it is ranked #11.
Click here to see additional POWR Ratings for KEYS (Growth, Value, and Momentum).
Ribbon Communications Inc. (RBBN)
RBBN in Westford, Mass., is a communications technology company that deals in Cloud and Edge and IP and networking solutions globally. The Cloud and Edge segments provide infrastructure, products, and services. Its IP and optical networks segment delivers solutions over a range of technological services, including 5G network solutions.
On August 24, RBBN expanded its partnership with communication services KGPCo that allows the latter to re-sell RBBN’s cloud and edge, IP, and networking solutions products. David Hogan, Vice President of Enterprise & Channel Sales for the company, said, “Our expanded partnership allows both organizations to leverage our individual strengths to help service providers transform their legacy networks. Additionally, having the ability to now extend KGPCo’s world-class services capabilities to our customers and prospects will be a critical component of our joint successes moving forward.”
On August 12,Tbaytel, the largest independently owned telecommunications provider in Canada, selected key components from RBBN’s fixed voice core solutions suite to modernize its communications network. This demonstrates the company’s dominance in the industry.
RBBN’s revenue from services increased 9.4% year-over-year to $98.08 million in its fiscal second quarter, ended June 30. The company’s non-GAAP net income rose 135.4% year-over-year to $26.85 million, while its non-GAAP EPS improved 112.5% from the prior-year quarter to $0.17. Its non-GAAP adjusted EBITDA increased 45.7% year-over-year to $43.05 million. Also, RBBN’s total revenue increased 9.6% sequentially from the first quarter to $211.21 million.
The Street’s $269.31 million revenue estimate for the next quarter (ending December 2021) indicates a 10.3% increase year-over-year. The $0.20 consensus EPS estimate for the same period reflects an 11.1% rise year-over-year. Furthermore, RBBN has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters. RBBN’s stock has gained 53.7% in price in the past year to close yesterday’s trading session at $6.50.
RBBN’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
In addition, RBBN has a Value grade of A, and a Sentiment grade of B. In the B-rated Technology – Communication/Networking industry, it is ranked #8 out of the 54 stocks.
To see additional RBBN ratings for Growth, Momentum, Stability, and Quality, click here.
Gilat Satellite Networks Ltd. (GILT)
GILT is an end-to-end service provider for ground-based satellite equipment. The company operates primarily through three segments: Fixed Networks; Mobility Solutions, and Terrestrial Infrastructure Projects. GILT has also expanded its LTE satellite backhaul to support 5G technology. The company is headquartered in Petah Tikva, Israel.
On August 19, GILT was awarded a multi-million-dollar contract by the Luxembourg-based SES S.A.(SESG.PA) to provide multiple broadband network applications in Latin America. The venture aims to expand high-quality connectivity in the remote corners of the continent. Earlier in the same month, GILT received an award of more than $5 million from a Tier-1 U.S. terminal provider to provide solid state power amplifiers (SSPAs) for satellite communication (SATCOM) terminals for militaries worldwide. GILT has received several multi-million-dollar contracts over the past month. These should improve the company’s financials substantially in the coming months.
For its fiscal second quarter, ended June 30, GILT’s revenue has increased 48.6% year-over-year to $56.92 million. The company’s non-GAAP gross profit increased 74% from the prior-year quarter to $16.78 million. Its net income and EPS came in at $0.39 million and $0.01, respectively, indicating a substantial improvement from the negative year-ago values. And its adjusted EBITDA rose 2,560.6% year-over-year to $2.50 million.
Analysts expect its revenue to increase 8.6% sequentially to $61.82 million in the next quarter (ending September 2021). The stock has gained 84.6% in price over the past year and 51.2% year-to-date to close yesterday’s trading session at $9.86.
It’s no surprise that GILT has an overall B rating, which equates to Buy. The stock has a Growth, Value, and Sentiment grade of B also. GILT is ranked #18 among the 54 stocks in the Technology – Communication/Networking industry.
In addition to the POWR Ratings we’ve stated above, one can see GILT ratings for Momentum, Quality, and Stability here.
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KEYS shares were trading at $179.64 per share on Thursday afternoon, up $0.92 (+0.51%). Year-to-date, KEYS has gained 36.00%, versus a 21.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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