5G, or the “fifth generation” of mobile networks, has the potential to change the face of the technology industry. Its rollout has garnered much attention over the past few years. And heightened interest in its rollout and utility is likely to continue this year and beyond. The speed of network connections is growing ever more critical in the current digital communications ecosystem, and 5G facilitates faster connections and processing.
5G technology delivers advantages such as lower latency, better signals, and increased online capacity, all of which improve user experience. Semiconductor, video-gaming, telecommunications, and consumer electronics are some of the sectors poised to gain from the widespread adoption of the 5G standard. According to Grand View Research, the global 5G market is expected to rise at 43.9% CAGR from 2021 to 2027.
Three companies in the communications and networking space that are well-positioned to benefit from 5G adoption are Motorola Solutions (MSI), Viavi Solutions (VIAV), and Adtran (ADTN). Their stocks have performed consistently over the past year and we think their momentum is likely to continue in the coming months because these companies are fundamentally strong and have undertaken numerous organic and inorganic growth initiatives.
Motorola Solutions, Inc. (MSI)
MSI is involved primarily in critical communications and analytics in the United States, the United Kingdom, Canada, and other countries. The company operates through its Products and Systems Integration, and Services and Software segments. MSI caters to government, public safety, and commercial communication networks. The company offers monitoring, software updates, and cyber security services.
MSI’s revenue for the fourth quarter, ended December 31, 2020 declined 4.7% year-over-year to $2.2 billion. Its EPS for the quarter climbed to $2.37 from $1.47 posted in the prior year. Its Software and Services segment rose 8% for the fourth quarter. MSI recently opened a new Video Security & Analytics (VS&A) manufacturing facility in Richardson, Texas. Th facility was built to expand MSI’s production and shipping capabilities to boost the growth of its video security portfolio. Over the past few years, MSI has made several acquisitions in the domestic and international markets in the video security and analytics space.
Analysts expect MSI’s revenue for the quarter ending March 31, 2021 to be $1.75 billion, representing a 5.8% increase year-over-year. Its EPS for the quarter is likely to increase 8.7% to $1.62.
MSI ended yesterday’s trading session at $182.94, declining 0.6% over the past year. During the past six months, MSI gained 24.4%.
MSI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
MSI also has a B grade for Quality and Sentiment. It is ranked #16 of 56 stocks in the B-rated Technology – Communication/Networking industry.
In total, we rate MSI on eight different levels. Beyond what we stated above, we have also given MSI grades for Growth, Value, Stability, and Momentum. Get all the MSI ratings here.
Viavi Solutions Inc. (VIAV)
VIAV is a global leader in network testing, monitoring, and assurance solutions. It markets these services to communications service providers, network equipment manufacturers, enterprises, government, civil, military, and avionics customers globally. Network Enablement (NE), Service Enablement (SE), and Optical Security and Performance Products (OSP) are the three segments through which the company operates. VIAV also offers management solutions for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive and defense applications.
Earlier this month, VIAV announced that it plans to establish a new manufacturing facility in Chandler, Arizona for .its Optical Security and Performance Products (OSP) segment. The company also plans to shift its headquarters to Chandler and house at least 100 employees by 2022.
During the second quarter, ended December 31, 2020, VIAV’s net revenue decreased 4.4% year-over-year to $299.9 million. OSP witnessed stronger-than-expected demand from both Anti-Counterfeiting and 3D sensing products. NSE revenue rebounded, driven by the constant recovery of service provider activities and continued strength in Lab & Production demand. Its EPS for the quarter declined 25% over the year to $0.09.
A consensus revenue estimate for the quarter ending March 31, 2021 is $290.5 million, representing a 13.4% increase year-over-year. Meanwhile, analysts expect EPS to grow 21.4% to $0.17.
Over the past year, VIAV has gained 17.6% to end yesterday’ trading session at $16.50. Over the past six months, the stock has risen 24.5%.
VIAV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. VIAV has a B grade for Growth, Value, and Momentum. It is ranked #2 of 56 stocks in the Technology – Communication/Networking industry.
Click here to see the additional POWR Ratings for VIAV (Quality, Stability, and Sentiment).
ADTRAN, Inc. (ADTN)
ADTN is involved in the core functioning of networking and communications equipment for service providers, distributed enterprises, and cable/multiple system operators in the United States and globally. The company operates through its Network Solutions, and Services & Support segments.
ADTN’s GPON solution helped Openreach, a division of BT Group, to connect its first live fiber subscriber. Openreach is deploying ADTN’s SDX series optical line terminal (OLT) posts and its Mosaic Cloud platform to support its GPON and XGS-PON network. The company also plans to have 20 million locations passed with fiber by mid-to late 2020s. This indicates a massive opportunity for ADTN.
During the fourth quarter, ended December 31, 2020, ADTN’s total sales climbed 12.3% year-over-year to $130.1 million, led by growth in the Network Solutions. Its EPS for the quarter was $0.13 compared to loss per share of $0.24 posted in the prior year period.
Analysts expect revenue for the quarter ending June 30, 2021 to be $126.3 million, representing 10.3% year-over-year growth. Its EPS is likely to grow 180% to $0.04.
ADTN has surged 80.2% during the past year to close yesterday’s session at $15.54. Over the past six months, the stock has gained 34.3%.
ADTN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. ADTN has a B grade for Growth and Value. In the Technology – Communication/Networking industry, it is ranked #8.
In addition to the POWR Ratings grades I’ve just highlighted, you can see ADTN’s ratings for Momentum, Sentiment, Stability and Quality here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Want More Great Investing Ideas?
MSI shares were trading at $184.05 per share on Friday afternoon, up $1.09 (+0.60%). Year-to-date, MSI has gained 8.23%, versus a 4.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|MSI||Get Rating||Get Rating||Get Rating|
|VIAV||Get Rating||Get Rating||Get Rating|
|ADTN||Get Rating||Get Rating||Get Rating|