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 (NASDAQ:NXTG). Since March 23, 2020, the ETF has gained 104%.
But you could get even better performance if you focus on the top stocks that stand to benefit from 5G. That’s why investors should consider these stocks, which are rated highly in our POWR Ratings system:
Qualcomm (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 (NASDAQ: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 No. 11 in the A-rated Semiconductor & Wireless Chip industry. For more top stocks in this industry, click here.
AT&T (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 No. 3 in the Telecom – Domestic industry. For more top stocks in this industry, make sure to click this link.
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