5G or fifth-generation telecom promises huge changes in the way we interact with technology. For investors, this means it’s time to think about 5G stocks.
5G will not only be faster, but it will provide more bandwidth. This means that we, and the companies that provide us with data, can provide more data simultaneously.
If I can lean on the analogy of water through a hose — not only will the water move faster through the hose, but the hose will also increase in size. This is going to mean that wireless connections will be as fast, and in some places faster, than the available wireline services.
It will mean technologies like smart cars and everything provided through cloud services will be accessed in near real time, wherever you are. It will also change providers’ ability to share content like movies, games or teleconferences. Along the way, the companies facilitating all of this could see enormous upside in their share prices.
And the seven 5G stocks looking to the future that I feature below are laying the tracks for the next telecom expansion across the U.S. and the world.
- Ciena (NYSE:CIEN)
- Intel (NASDAQ:INTC)
- Lumentum (NASDAQ:LITE)
- American Tower REIT (NYSE:AMT)
- Crown Castle International (NYSE:CCI)
- Qualcomm (NASDAQ:QCOM)
- Texas Instruments (NASDAQ:TXN)
5G Stocks to Buy: Ciena (CIEN)
This optical networking firm has been around since 1992. It’s been around so long, it’s headquartered in quiet Hanover, Maryland, since Silicon Valley was just glimmer in geeks’ eyes back then.
It was way ahead of its time. It specializes in optical networking equipment. The thing was, back then, fiber optic cable was as scarce as hen’s teeth. It was a play on the future of the internet.
Before the tech bubble burst, CIEN stock traded as high as $847 a share. But those were the days when brokers were telling clients that growth was the new income and a growth stock wasn’t respectable if it didn’t have a triple-digit price-earnings ratio.
But CIEN made it through, which is testament to its management and its technology. Now, 20 years later, it is one of the leading companies in the vibrant and expanding optical networking space.
The stock is up 56% in the past 12 months and 28% year to date. Yet, it still only trades at a P/E of 30.
The computer you’re using to read this likely has an Intel chip or two inside it. It’s the largest semiconductor company in the world and invented the x86 chip that sits in almost every personal computer. And next month it will celebrate its 51st birthday.
Intel has had its struggles remaining at the top of the chip heap. Management didn’t get in the mobility sector until it was too late, and missed a huge opportunity in the smartphone world. But it is well-positioned in the internet of things (IOT), and has found opportunities in markets like 5G, AI, memory and networking as well.
The competition is tough. CEO Bob Swan is an industry veteran but not a career Intel guy, and he took over in January 2019. Much of his leadership career was operating as a CFO for various large tech firms, so it will be interesting to see if he can keep INTC moving in the right directions.
So far, so good. The stock is up 42% in the past year and 3% year to date. It also delivers a solid 2.1% dividend. And besides INTC itself, the 5G upgrade offers investors the chance to buy potentially the “next Intel” today.
This company is also in the optical networking sector, but it launched just five years ago. And instead of focusing on the optical switching aspects, LITE focuses on the distribution and transmission of fiber optic networks.
It also makes a variety of lasers for numerous applications. The lasers are used to build equipment in industries as varied as the automotive sector to mobile phones and semiconductors. And they are used for 3D sensing equipment.
Just as cloud computing ultimately needs real hardware to operate, mobile networks need the fastest data transmission possible. And for now, that’s fiber optic cables.
That means that the greater the global demand for 5G, the more business LITE stands to gain. Also, the more we rely on advanced technologies, the more demand there will be to build more advance devices.
The stock is up 72% in the past year and is off 9% year to date.
American Tower REIT (AMT)
As you well know, mobile signals need mobile transmission towers. AMT is one of the top tower companies in the world, and it’s one of the top 5G stocks to buy.
It has operations across North America, Latin America, Europe, Africa and Asia. Since towers are property, AMT became a real estate investment trust (REIT), which has tax advantages for the company and the shareholders. All REITs consider shareholders direct owners and distribute net income via a dividend.
5G is going to need towers because its antenna are different than previous generations of telecom services. Given the fact that AMT already has more than 180,000 towers around the world, and a solid history as a reliable partner, it’s well positioned for the 5G wave.
It continues to acquire smaller broadcast companies around the globe, including India and Africa, where mobile telecom is much denser than traditional wireline services.
The stock is up 27% in the past year and 12% year to date. It also provides a 1.7% dividend. It’s among my top stocks for the worldwide 5G upgrade taking hold now.
Crown Castle International (CCI)
This is another tower company, but it has two difference from AMT. First, it focuses its operations on the U.S., where it has over 40,000 towers.
Second, it also has a significant small cells business for denser spots like office buildings and stadiums, as well as more than 80,000 miles of fiber optic cable. These are key sectors for 5G stocks because 5G has unique challenges in cities, and venues like stadiums will have growing challenges as events become carried on live streams and guests will be sharing across social media.
CCI is also a REIT and is delivering an impressive 3% dividend currently. The stock is up 34% in the past 12 months, and 19% year to date.
Owning both AMT and CCI stock captures a significant amount of the potential 5G transmission sector, but both stocks are trading at premiums currently.
This telecom chipmaker has been around since 1985 and has been a major player in the mobility revolution. Its origins were building out CDMA telecom technology for commercial trucking operations. When mobile phones came out, one of the leading channels used for phones in the U.S. became CDMA.
Now, CDMA and GSM run all the phones around the world and most chips can switch from one channel to the other if necessary.
QCOM makes more money on licensing its patents than it does on actually shipping chips. That means it doesn’t have to build massively expensive chip plants, and focuses on design rather than production.
However, Qualcomm has run into antitrust issues. A few years ago it had to pay out massive fines to China and other countries that sued it because of its monopolistic hold on mobile phone infrastructure.
But those days are behind it, and it is certainly going to be a major player as 5G starts to roll out globally.
The stock is up 20% in the past year and off almost 12% year to date. It has an impressive 3.2% dividend and is trading at a reasonable P/E of 23.
Texas Instruments (TXN)
Many people remember TXN as the company that built the coolest calculators around. And the fact is, it continues to make the default calculators for most high school students.
But Texas Instruments, which has been around since 1930, is also one of the biggest chipmakers in the world. Nearly 80% of its revenue comes from analog chips and embedded processors. Analog chips convert analog inputs — like voice — into digital form for processing. And embedded processors are dedicated systems that provide a function within a larger piece of equipment or system. Think a sound system inside a car.
These aren’t sexy, but they are everywhere. And TXN can produce high-quality, reliable chips and processors in huge quantities. With everything going digital, that means TXN is in a growth business and is already producing at scale, and making money doing it.
Not every aspect of our digital lives has to be built from cutting-edge designs; keeping some things simple makes high-performance equipment easier to maintain and more reliable. And TXN is certainly keeping up with the biggest trends, including 5G, but it is a significant supporting player, not a headliner.
The stock is up nearly 14% in the past 12 months, and off 10% year to date. It also offers a durable and generous 3% dividend.
Texas Instruments and other hardware makers I’ve mentioned here today are great examples of 5G stocks that stand to benefit from the 5G revolution.
And I see even better potential with the companies that are making this massive infrastructure upgrade possible in the first place!