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The 5G revolution could send these 3 stocks higher
We’ve now had a full month of 2021 and a few trends are becoming clearer. The coronavirus crisis may still be with us, but as vaccination programs expand, the end is in sight. With President Trump out of the picture, and the Democrats occupying both the Houses of Congress and the White House, politics look more predictable. And both developments bode well for an economic recovery this year. Looking back on the year that was, we can also see some trends that have held steady despite the pandemic, shutdowns and supercharged election season. One of the most important is the continuous rollout of 5G network technology. These new networks bring a fuller realization of the promises inherent in the digital world. Faster connections, lower latency, higher online capacity, clearer signals – all this will greatly enhance the capabilities of the network world. And it won’t just be mundane things like telecommuting or remote offices that will benefit – 5G will enable the Internet of Things and autonomous vehicles to further develop their potential. There are even medical applications, of remote physicians performing operations with digitally controlled microsurgical instruments. And these are just the possibilities that we can see from now on. Who knows what the future will really hold? To that end, we’ve opened up the TipRanks database to learn about three exciting plays in the 5G space. According to The Street, we will likely see more interesting developments in the coming years as this technology takes over. Skyworks Solutions (SWKS) The first 5G name we’re looking at, Skyworks, is a semiconductor chip manufacturer that brought in $ 3.4 billion in total revenue in FY2020. Skyworks, a major supplier of chips for Apple’s iPhone series, saw a massive 68% year-over-year increase in 1QFY21 revenues – sales hit $ 1.51 billion, a business record, and also much higher than analysts predicted . Much of Skyworks’ fiscal sales success in the first quarter came after Apple launched the 5G-compatible iPhone 12 line. Strong sales of the popular handset device have trickled profits down the supply line – and Skyworks channels a disproportionate portion of its sales to Apple. In fact, Apple orders accounted for 70% of Skyworks’ revenues in the past quarter. However, the iPhone was not the only 5G handset on the receiving end of the Skyworks chips – the company is also a major supplier to the Korean Samsung and the Chinese Xiaomi, and has seen demand rise as these companies also have 5G-compatible smartphones. launch. Finally, Skyworks supplies semiconductor chip components to the wireless infrastructure sector, especially the small cell transmission units that are important in the propagation network of wireless signals. As the wireless carriers switch to 5G transmission, Skyworks has seen orders for its products increase. In his note on Skyworks for Benchmark, five-star analyst Ruben Roy writes, “SWKS significantly exceeded consensus estimates and provided quarterly guidance for March that was also well ahead of consensus estimates as 5G-related mobile revenue and broad segment revenues continued to accelerate … In addition to the continued strength of the momentum for winning the customer’s design and activity, we are encouraged with SWKS’s confident tone towards the overall demand environment and content augmentation opportunities. “In line with his comments, Roy rates SWKS as a buy, along with a price target of $ 215. At the current level, this represents a 20% increase for the coming year. (Click here to view Roy’s track record) Roy is Broadly in line with the rest of Wall Street, which has awarded SWKS 13 Buy ratings and 7 Holds for the past three months – and sees the stock grow about 15% over the next three months.12 months, at a target price of $ 205,69. (See SWKS Stock Analysis on TipRanks) Qorvo, Inc. (QRVO) Qorvo’s main products are chipsets used in the construction of radio frequency transmission systems that power Wi-Fi and broadband communication networks. This niche’s connection to 5G is clear – as network providers upgrade their RF hardware to 5G, they are also upgrading the semiconductor chips that drive the systems. This chipmaker has a solid niche, but is not resting on its laurels. Qorvo develops actively a range of new products specifically for 5G systems and implementation. This 5G radio frequency product portfolio includes phase shifters, switches and integrated modules, and includes both infrastructure and mobile products. Qorvo posted $ 3.24 billion in total revenues in fiscal 2020. That revenue represents a 4.8% year-over-year increase – and the company’s revenue accelerated in fiscal 2021. The most recent quarterly report, for the second fiscal quarter, showed $ 1.06 billion in revenue, up 31% year-on-year. Rajvindra Gill, 5-star analyst at Needham, is optimistic about Qorvo’s outlook, noting, “Qorvo reported strong sales and gross margins as the momentum of 5G CY21 penetrates due to atypical seasonality … The company plans to release 500M 5G handsets to be produced by 2021, at an incremental $ 5-7 in content / unit from 4G to 5G. Management believes that ultra-wideband adoption will be a major growth driver for smartphones in the future… ”To that end, Gill sets a $ 220 price target on QRVO shares, suggesting there is room for a 31% rise in 2021. Accordingly, he assesses the (Click here to view Gill’s track record) What other analysts have to say? 13 Buys and 6 Holds equates to an analyst consensus for Moderate Buy. Given the average price target of $ 192.28, stocks could be ~ 15 % up from current levels. (See QRVO stock analysis on TipRanks) Telefonakiebolaget LM Ericsson (ERIC) From chipsets to handsets. Ericsson, the Swedish telecom giant, has long been a leader in mobile technology and known for its infrastructure and software enabling IP networks, broadband, cable TV and other telecom services. Ericsson is the largest European telecom company and the largest 2G / 3G / 4G infrastructure provider outside C hina. But that’s all in the background. Ericsson is also a leader in the rollout of Europe’s growing 5G networks. Ericsson is involved in the rollout of 5G in 17 countries in Europe, the Americas and Asia, and its product line includes infrastructure base units and handsets, giving the company an interest in all aspects of the new 5G networks. Ericsson’s sales development in 2020 was not significantly disrupted by the corona crisis. Yes, sales were down in Q1, but that was in line with the company’s historical pattern of rising revenues from Q1 to Q4. While the company’s revenues were slightly down in 1H20, profits were higher in 2H20. In the third quarter, sales of $ 6.48 billion were up 8.7% yoy, and sales of $ 8.08 billion in Q4 were 17% higher than the previous year. The company’s stock also performed well during the ‘corona year’, showing a profit of 64% over 12 months. Raymond James’ five-star analyst Simon Leopold bluntly attributes Ericsson’s recent win to his participation in the 5G rollout. “The rollout of 5G in Japan has started. Stock gains continues as Ericsson takes advantage of the challenges facing its main competitors and more operators are embracing 5G … it seems clear Ericsson should gain market share … Competitor Nokia eschewed the Chinese 5G projects, citing profitability issues, but Ericsson appears to take advantage of the challenging region. Leopold rates this stock as outperforming (ie buying), and its $ 15 price target implies ~ 14% upside potential for the coming year. (To view Leopold’s track record, click here) The Raymond James Analyst, while optimistic about ERIC, that is actually less than the Wall Street consensus. The stock has a Strong Buy consensus rating, based on a unanimous 5 ratings, and the $ 16.50 average target price indicates 25% growth potential over relative to the stock price of $ 13.19. (See ERIC Stock Analysis on TipRanks) To find great ideas for 5G stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that covers all Insights in TipRanks on stocks. Disclaimer: The opinions expressed in this article are only those of the recommended analysts. The content is provided for informational purposes only. It is very important to make your own analysis e before making an investment.