One of the most significant investment themes over the past few years has been 5G technology. The introduction of 5G has markedly increased global telecommunications. As the world has become more reliant on data, 5G infrastructure makes transmitting information across networks faster and more efficient.
Even governments consider the development of 5G networks to be extremely important. While the ongoing chip shortage has weighed down some 5G companies, there’s no question that many companies stand to benefit from the transition to 5G. We can get an idea of this performance through the First Trust Indxx NextG ETF (NXTG). Since March 23rd of 2020, the ETF has gained 104%.
But you could get even better performance if you focus on the top stocks that stand benefit from 5G. That’s why investors should consider Qualcomm Inc. (QCOM), AT&T Inc. (T), and Ericsson ADR (ERIC), which are rated highly in our POWR Ratings system.
Qualcomm Inc. (QCOM)
QCOM develops and licenses wireless technology and designs chips for smartphones. The company’s patents involve CDMA and OFDMA technologies. These are standards in wireless communications and the backbone of all 3G and 4G networks. The firm is a leader in 5G network technology as well. Virtually all wireless device makers license QCOM’s IP.
The company is also the world’s largest wireless chip vendor, supplying nearly every premier handset maker with leading-edge processors. Plus, it sells RF-front end modules into smartphones and chips into automotive and Internet of Things markets. Its strong recent results were above the high end of management’s guidance.
The company benefited from the ongoing ramp of 5G smartphones and broad-based chip demand. Chipset sales were boosted by continued 5G adoption, including Apple’s (AAPL) latest iPhones. QCOM has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company has Momentum Grade of B, which isn’t surprising with strong near-, mid-, and long-term returns.
For instance, the stock is up 31.4% over the past month. QCOM also has a Sentiment Grade of A as it’s well-liked by analysts. Twenty-five analysts currently hold a Buy or Strong Buy rating on the stock. We also provide Growth, Value, Stability, and Quality Grades for QCOM, which you can find here. QCOM is ranked #11 in the A-rated Semiconductor & Wireless Chip industry. For more top stocks in this industry, click here.
AT&T Inc. (T)
T is the third-largest U.S. wireless carrier, connecting 66 million postpaid and 17 million prepaid phone customers. WarnerMedia contributes less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. T plans to spin Warner off and merge it with Discovery to create a new stand-alone media firm. The company is seeing healthy wireless traction and subscriber growth.
T saw a net increase in total wireless subscribers of 4.9 million to reach 196.5 million in the latest quarter. The firm’s subscriber momentum led to more than 1,218,000 postpaid net additions and 249,000 prepaid phone net additions. This was due to the continued trend of work-from-home. Its subscriber growth was driven by strength in 5G, fiber, and HBO Max.
T has an overall grade of B and a Buy rating in our POWR Ratings system. The company has a Value Grade of B as its valuation metrics look attractive. For instance, the stock has a forward P/E of 7.67 and a price to free cash flow ratio of 6.9, which is well below the industry average. T also has a Stability Grade of B, indicating that its growth and price performance have been stable.
For instance, the stock currently has a beta of only 0.42. For the rest of T’s Grades (Growth, Momentum, Sentiment, and Quality), click here. T is ranked #3 in the Telecom – Domestic industry. For more top stocks in this industry, make sure to click this link.
Ericsson ADR (ERIC)
ERIC is a leading supplier within the telecommunications equipment sector. Its major operating segments include networks, digital services, and managed services. The company sells hardware, software, and services primarily to communication service providers while licensing patents to handset manufacturers. In the company’s recent earnings report, earnings outperformed estimates and rose year over year.
Sales surged 768% year over year in the quarter, driven by double-digit growth in North America, Europe, and Latin America. ERIC has also been expanding its footprint by leveraging its 5G portfolio. For instance, its acquisition of Cradlepoint has reinforced the company’s ability to grow in the 5G enterprise market. Plus, the company has been investing in research and development to help with technology and cost leadership.
ERIC has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Value Grade of A, which makes sense with a trailing P/E of 15.81 and a forward P/E of 13.09. ERIC also has a Stability Grade of B due to stable price returns. This is confirmed with a low beta of 0.60. To access all of ERIC’s grades, including Growth, Momentum, Sentiment, and Quality, click here.
ERIC is ranked #7 in the Technology – Communication/Networking industry. For more top-ranked stocks in this industry, click this link.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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QCOM shares rose $1.55 (+0.84%) in premarket trading Thursday. Year-to-date, QCOM has gained 23.50%, versus a 26.73% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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