New technological trends have massive impacts on how people live and do business. It can also lead to lucrative stock market profits for anyone who catches it at the right time.
Another trend that is going to have similar, seismic impacts is 5G networks. Like, previous trends, it’s hard to fathom the full impact of these changes. Complete 5G coverage of the US is expected to take until 2022.
5G allows for faster speeds, more data transmission, and will allow for more devices to be connected to the network. One result of 5G is that all types of sensors and smart devices will be connected to the wireless grid. 5G download speeds will also be six to seven times faster than 4G. The capacity for the number of devices it can support at these speeds is four times more than 4G.
This is going to augment the power and capabilities of smartphones and make streaming virtual reality or augmented reality a possibility. It will also make video quality much better. Ultimately, people may no longer feel the need to have the internet at home, since their phones will be so much faster.
Ordinarily, hardware manufacturing is a tough, low-margin business, especially for smaller-sized companies. There’s a constant need to innovate to keep up with competitors. Manufacturing hardware is expensive and requires huge amounts of capital investment.
In most circumstances, these realities are reflected in a cyclical stock price that follows the ebbs and flows of the economy. However, once in a while, there’s a big surge in demand which gives stocks like CIEN pricing power and can lead to huge profits and big stock gains.
This seems to be happening currently with the 5G investment cycle. CIEN makes network equipment components that are used by telecom companies. Like many stocks in its sector, it’s breaking out new, all-time highs.
The stock’s POWR Ratings is also very strong with a “Strong Buy” rating and an “A” in Trade Grade and Buy & Hold Grade. It’s graded “B” in Peer Grade and has a “C” in Industry Rank. Overall, it’s ranked #1 in the Technology – Communications/Networking sector.
American Tower (AMT)
American Tower is a REIT that owns and operates cell phone towers. 5G is going to lead to more construction of cell towers which will drive revenue for American Tower. Additionally, there is going to be increased bidding to secure leases from the cell phone operators.
Overall, Americans are spending an average of 3 hours per day on their smartphones, and this is expected to continue rising to four hours over the next decade. This means that demand for AMT’s services will continue to increase. As of the last quarter, 88% of AMT’s revenue came from Verizon (VZ), AT&T (T), and Sprint (S), as it has long-term contracts with these providers.
AMT has been one of the best-performing stocks over the past decade due to these factors. Its POWR Ratings is also consistent with its long-term track record of outperformance. AMT is graded as a “Strong Buy”. It is rated an “A” in Trade Grade, Peer Grade, and Buy & Hold Grade. For Industry Rank, it has a “B”. It’s also rated the #1 stock in the REIT – Diversified group.
LITE is a relatively new company in the optical networking space. It provides equipment used in all types of products including network equipment, phones, and servers that will be in greater demand as the world shifts to 5G. Its main customers include major tech companies, defense contractors, and mobile operators.
LITE’s stock has been range-bound for the bulk of the year. However, over this period, its fundamentals have improved as it has exposure to the 5G upgrade cycle. The stock is expected to grow earnings over the next 12 months by 210% compared to the previous 12 months. Its chart shows that it’s breaking out through its downtrend line and providing a low-risk entry point.
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CIEN shares were unchanged in after-hours trading Monday. Year-to-date, CIEN has gained 24.50%, versus a -5.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Jaimini Desai
Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. As a reporter, he covered the bond market, earnings, and economic data, publishing multiple times a day to readers all over the world. Learn more about Jaimini’s background, along with links to his most recent articles. More...
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