7 of the Best 5G Stocks to Buy
How to invest in the transition to 5G networks.
The coming transition from 4G to 5G cellular networks (the "G" standing for generation) is expected to facilitate the next phase of technological change and innovation. The move from 3G to 4G allowed Uber (ticker: UBER), Snapchat (SNAP) and online banking itself to emerge and change the culture. 5G could be 100 times faster than 4G; it's expected to facilitate the next wave of technological advancements, including autonomous vehicles, virtual and augmented reality and the "internet of things." Market intelligence firm IDC expects the number of 5G connections to surge from 10 million in 2019 to more than 1 billion in 2023. With that in mind, here are seven of the best 5G stocks to buy now.
Xilinx (XLNX)
This $22 billion chipmaker is one of the earliest companies to cash in on the next generation of wireless networking. And as such, it rightfully deserves a place as one of the best 5G stocks to buy. As infrastructure spending increases, Xilinx will be a direct beneficiary since its chips are used as components for much of this 5G build-out. An impressive portfolio of radio frequency and system-on-a-chip technologies now can be used in all spectrum bands below 6 GHz, which will be important in helping to project 5G coverage over long distances. The most recent 5G win for Xilinx came on its last earnings call when CEO Victor Peng announced the company had secured a design contract with Samsung for its second-generation 5G radio.
Qualcomm (QCOM)
Any list of so-called 5G stocks would be incomplete without Qualcomm, another chipmaker that also happens to have an incredibly impressive portfolio of intellectual property related to 5G tech. A great settlement with Apple (AAPL) in 2019 allows Qualcomm to supply chips for the iPhone for at least the next six years. With the long and expensive Apple beef now squashed, Apple can now release a 5G-compatible iPhone sooner than previously expected, benefiting both companies. Due to its widespread 5G intellectual property patents, royalties should be meaningful to shareholders for years to come. Demand for Qualcomm chips will undoubtedly be hit by the pandemic in 2020, but investors may be too bearish on QCOM given its long-term foothold: Shares trade below 13 times forward earnings and offer a 3.4% dividend with interest rates at zero.
Ericsson (ERIC)
Swedish communications-equipment company Ericsson is already a key player in the global rollout of 5G technology, helping telecom companies upgrade their networks to the new higher-speed networks. The company also sells software and radio network hardware, and in 2019, it struck a licensing agreement with high-growth Chinese smartphone maker Oppo. U.S. national security concerns surrounding direct competitor Huawei's technology should benefit Ericsson, too, as it picks up market share. Ericsson expects global 5G mobile subscriptions to be 2.6 billion by 2025, with adoption scaling up faster than LTE after its 2009 launch. According to Ericsson, it's "the first company to launch live commercial 5G networks on four continents."
Crown Castle (CCI)
Building new cell towers will be one big infrastructure expense required to achieve 5G connectivity. The last leg of 5G transmission, unlike 4G, will require antennas within several hundred yards of the connected device to ensure signal strength and speed; previously, towers could beam connectivity over much longer distances. This will require tens of thousands of smaller cell towers -- the type in which real estate investment trust Crown Castle specializes. CCI boasts more than 70,000 small cell nodes that are either operational or under contract. Carriers often opt to rent instead of build tower space, so CCI's steady expansion will translate into vast recurring revenue streams in upcoming years. This 5G stock also pays a 2.9% dividend. As demand for data and wireless communications has spiked in 2020, so too has CCI stock -- up about 15% through late April and within reach of recent all-time highs.
Verizon Communications (VZ)
If staying power and dividends are traits you love in stocks, the major U.S. telecoms are for you, especially as 5G rolls around. And a major factor in any telecom's success is its coverage area, which makes being in the top 50 markets a valuable competitive benchmark. In the top 50 markets, Verizon dominates the ownership of key 5G spectrum bands, controlling roughly twice as much millimeter-wave spectrum as its closest rival, AT&T (T). High-frequency transmission is central to 5G's promise of higher data transfer rates. VZ is one of the best stocks to buy for 5G largely for its spectrum holdings and near-certain staying power; a 4.2% dividend doesn't hurt, either.
Marvell Technology (MRVL)
This consumer semiconductor products company has its hands in a number of high-growth, interrelated areas, including 5G, cloud, artificial intelligence, enterprise hardware and the automotive space, especially after its $6 billion Cavium acquisition in 2018. While Marvell is definitely a long-term play on 5G -- the vast majority of additional revenue from the 5G rollout will come in during the years ahead -- there could be significant upside should MRVL shore up design contracts with additional manufacturers. A recent major design win was with Samsung to provide chips to power LTE and 5G base stations, which are integral to improving connectivity. MRVL trades for about 20 times forward earnings and pays roughly a 1% dividend.
Apple (AAPL)
One of the world's most valuable companies, Apple rounds out the list of the best 5G stocks in which to invest. Like most businesses, Apple's revenue and forward guidance have each been hit by the current downturn; unlike most companies, Apple is well-positioned to become one of the top 5G mobile device manufacturers. While analysts largely expect a delay in AAPL's typical September iPhone rollout period, onlookers still expect four different 5G-enabled iPhone models to hit markets in 2020. With more than $200 billion in cash on hand at last check, tough times and economic woes may perversely work in Apple's long-term favor, weeding out potential competitors and allowing the famously innovative company to invest in further developments.
The best 5G stocks for investors:
-- Xilinx (XLNX)
-- Qualcomm (QCOM)
-- Ericsson (ERIC)
-- Crown Castle (CCI)
-- Verizon Communications (VZ)
-- Marvell Technology (MRVL)
-- Apple (AAPL)
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