5G networks, although not yet widespread anywhere in the world, have already become a cause for scandals: supporters of conspiracy theories in some countries around the world are burning 5G mobile communication towers because they believe that they affect the spread of COVID-19.
Meanwhile, 5G promises three significant changes: much faster Internet speed without delay, signal continuity, and the ability to connect a huge number of devices. The network is designed to develop high-definition video, virtual and augmented reality systems (AR/VR), as well as to process large arrays of data in real-time.
There are already a lot of companies working on 5G technology on the stock market, but this term means different things: smartphone manufacturers, telecom operators, manufacturers of telecommunication equipment and processors.
So, in this article, you will learn what a 5G technology is and what are the best 5G stocks to invest in right now.
What are 5G Stocks?
Mobile communication has long ceased to be just calls and SMS. Now the main task of mobile networks is wireless data transmission, connection to the Internet. Every day we hear about 3G, 4G, 5G.
The fifth generation of mobile networks - 5G - promises to be especially breakthrough. They say that it is thanks to it that self-driving cars, virtual reality, and the Internet of Things will actively enter our everyday life. At the present moment, the communication technology of the fifth generation is actively tested all over the world.
Although the rate of 5G proliferation remains high, the technology itself is not exactly what people expect. 5G means not only the fifth generation communication but also the move to new data transmission frequencies from the communication tower to the subscriber's phone. It is not only the same stumbling block of worldwide operators but also a whole heap of technologies that require different implementation efforts. So the very support 5G, declared by the operator, can mean quite different things to the end-user. The only common thing is the promise of greater network speed and capacity.
From a technical point of view, 5G is the next generation of mobile communication. So far, it is nothing more than a complement to the existing 4G LTE network, allowing increasing network capacity in places where it is needed. There are three categories of 5G that are due to the frequency used for this connection. These are the low and midrange frequencies and the millimeter range (mmWave). In this case, the use of low and medium frequencies are called sub-6 5G. It means that in this connection the frequency is less than 6 GHz.
With any 5G connection, you will get high data rates, but only with the high-frequency millimeter range will there be a significant difference with previous generations of networks. In mmWave networks, the speeds will be maximum, but the coverage of such networks is very limited. The sub-6 5G can boast far greater coverage than LTE networks, but the speed will be at the maximum achievable in 4G LTE.
In the U.S., all major operators have chosen the strategy of combining all three 5G bands to get a single network where the differences will be based on building density, subscriber count, and other geographical factors.
Some countries, due to financial difficulties, are postponing the implementation of 5G to a later date. And Israeli Ministry of Communications announced prices for bands of 5th generation. However, the state will have to pay operators only in September 2021, after the company has deployed new networks.
Speaking about the prospects of the 5G technology, we have to agree that any attempts to look into the future, then look ridiculous and naive. Remember how the future was represented 50 years ago, many things turned out to be quite wrong. But we can assume that 5G will find its application:
in companies that will benefit from network development directly - chipmakers, they will earn money by producing something that is needed to build networks.
companies that directly benefit will be able to build an efficient business on this.
So, let us find out who will be able to take advantage of that and have a look at the best 5G stocks to invest in.
What Are the Best Stocks for 5G Technology?
Considering the hype around the development of 5G technology, everyone understands that it's a great opportunity for the companies to make money and/or attract more customers. Here are a few examples for you to see which spheres of business will benefit from that:
- Owners of cell towers;
They rent space on cell towers to cellular operators to install antennas, small cells, and other wireless equipment.
The business of renting space on cellular towers is attractive because it requires modest construction costs, low maintenance costs, while increased use of 5G will increase data transmission and consumption, which will lead to a steady increase in profits for owners of cellular towers.
- Cellular operators;
The explanation is simple - mobile operators will receive increased profits from the introduction of 5G because customers will have to pay more for these services.
- Technology companies.
Since on the horizon of growth in sales of devices with 5G will benefit not only their manufacturers but also suppliers of chips, mobile broadband modems, and new radio technology and other components to them.
Companies such as Facebook, Google, Amazon, and Netflix will certainly be the beneficiaries, but this is because the spread of 5G will simply support the growth of these companies' businesses. By making the services they offer even more user-friendly.
It is not the reason for the growth of these companies' shares, it's rather a tailwind for further growth. Needless to say, technological giants are already very expensive. All these companies are actively engaged in development in the field of VR and at the expense of those resources that the company already has. Both financial and human, because these companies employ huge specialists who get good money for their work.
It is these technological leaders who will be able to use 5G to develop their business faster than others. Therefore, there may be some kind of leap. But we remember that by multipliers all these companies now look quite threatening.
And, of course, we should not forget that consumers will need smartphones that support 5G technology to take advantage of the faster network. IDC estimates that this year's demand for 5G smartphones is expected to reach 123.5 million units and represent 8.9% of the total market. For comparison, last year 6.7 million 5G smartphones were sold.
Investors can take advantage of these huge opportunities, both in infrastructure and in the production of 5G smartphones.
Looking for 5G stocks to buy, make sure to study in detail all aspects of the business of the selected firms. Huawei, for example, may face difficulties. The USA, together with the G7 countries, is blocking the sale of telecommunications equipment. If this happens, other network providers will win more business deals. But if Huawei somehow calms down the U.S. and allows it to sell its 5G equipment, there will be more competition for all players in this segment. It is just an example for you to understand that the company's number of 5G patent families (which is 941 for
Huawei, by the way) is not a guarantee of your success, no matter how the business is doing right now. The overall track of the company will help you to check how it reacted to this or that technological boom or any other important event, so you can understand if it's the best 5G stocks to buy or not.
We have done some homework and prepared our list of the best 5G stocks to invest in right now. Go through and see if there is something you can implement in your portfolio.
The Top 5G Stocks
Qualcomm Inc (QCOM)
This company, which owns about 15% of all technological patents related to 5G, is definitely one of the best 5G stocks to invest in. The company produces communication chips for PCs, notebooks, and mobile devices, as well as equipment.
If we look at the company's revenue and profit dynamics, we will see that Qualcomm Golden Time is 2010-2014. This is exactly the era of high-speed Internet development. At that time, the revenue grew by 25% per year, then there was stagnation after 2014. And such dynamics is typical for many chipmaker companies, even Bitcoin did not help, if you look at the dynamics of finance.
The company has already started manufacturing and producing 5G chips. Besides, it is currently testing various systems of the fifth generation - both for corporations and ordinary users, which is called Project Pentari. It works with 5G and uses 3.5 GHz bandwidth. The system does not spread the signal in all directions, instead, it sends focused signals (6.5 degrees) to the specified devices within a radius of about 1.3 km. As a result, one user receives a communication channel with a bandwidth from 750 Mbit/s to 3 Gbit/s.
Also, Qualcomm develops systems that will be used indoors and outdoors - at stadiums, airports, etc., where there is a 5G-coverage. The company's interests also extend to the household and work sphere (we are talking about different types of communications for offices and homes), virtual reality, auto tech, IoT, and other spheres.
Recently the company introduced the first 5G system with hardware software and tools for advanced robots. The Qualcomm Robotics RB5 platform uses a new processor of the QRB5165 and has an accompanying module for connecting 4G LTE and 5G via the Qualcomm X55 modem, which is also used today in smartphones.
RB5 includes artificial intelligence. It allows developers to create smart, fast, and responsive machines. The best part is that it also has a very low power consumption, which is essential in the case of standalone robots, where the battery charge is just critical.
Qualcomm expects the new RB5-based machines to appear in service and production. At least 20 companies have already studied technology and are likely to use it. They even include LG, a manufacturer of drones Skydio, a manufacturer of security robots NXT Robotics and other companies involved in robot manufacturing.
Robotics and drones are a great opportunity for Qualcomm to take this business seriously and for a long time. It already feels quite confident in this field, but if the company manages to conquer robotics as well, everything will be great for it.
- Taiwan Semiconductor Manufacturing Co. (TSM)
Taiwan TSMC is the world's largest contract manufacturer of semiconductor products. In the first quarter of 2020, TSMC accounted for 54.1 percent of the industry's revenue, followed by Samsung with 15.1 percent, and GlobalFoundries with 7.7 percent. The semiconductor contract manufacturing market, according to Bloomberg, is now estimated at $250 billion annually.
TSMC is engaged in contract manufacturing of processors and other semiconductor components for many global companies, including MediaTek, AMD, Apple, Qualcomm, and, until recently, Huawei.
At a press conference for shareholders, TSMC announced that in May 2020, its consolidated net revenue was NT$93.82 billion (about $3.17 billion), down 2.3 percent from April 2020, but 16.6 percent from May the previous year. TSMC revenues for the period from January to May 2020 amounted to NT$ 500.42 billion (about $ 16.91 billion), an increase of 33.9% compared to the same period in 2019.
At the end of 2019, TSMC revenue was a record 1.07 trillion NT$ (about $ 34.63 billion), an increase of 3.7% compared to 2018. About 49% of the company's total revenue in 2019 was the sale of processors for smartphones, where it was shown 12% year to year. High-performance computing solutions (HPC) came in second place in terms of revenue - their share was 29%.
In early May 2020, CNews reported that TSMC management is negotiating with the U.S. authorities to open production lines in North America. Thus, the USA intends to secure the country's companies from difficulties against the background of coronavirus pandemic and closure of borders, as well as to ensure the security of American military projects by minimizing espionage attempts.
- Ericsson (ERIC)
Ericsson is a world leader in communication technologies and services. The company develops and promotes technologies that connect society. Ericsson's long-term relationships with the world's largest telecommunications operators allow people, companies, and organizations to reach their full potential and provide confidence in the future.
Ericsson's services, software, and infrastructure for mobile communications, broadband, and cloud solutions help companies in the telecommunications industry and beyond improve business efficiency, enhance the user experience, and open up new opportunities.
The company combines the global reach of its business with technological leadership. With operations in 180 countries, Ericsson employs over 110,000 people. Ericsson's technical support networks serve over 2.5 billion subscribers. More than 40% of mobile traffic in the world is transmitted through Ericsson networks. Investments in research and development ensure the company's leading position in the market and allow offering customers only the best and most advanced solutions.
By the way, Ericsson presented an updated forecast of connections to fifth-generation networks worldwide: by the end of 2020, the number of 5G connections will reach 190 million, and by the end of 2025. - 2.8 billion In Central and Eastern Europe, 5G networks will account for 27% of connections by 2025. The main growth driver is China. New data was published yesterday in the Ericsson Mobility Report for June 2020.
The report said that during the COVID-19 pandemic, operators continued to deploy 5G technology. In just the first six months of 2020, more than 20 operators have commercialized 5G networks, and more than 75 operators around the world are now providing 5G services. Total global mobile traffic is now estimated at 33 EB per month, and by 2025 it will grow fivefold. By that time, about 45% of total traffic will be generated in 5G networks.
While in some markets 5G connectivity growth has slowed due to the coronavirus pandemic, in other markets the number of connections has grown faster than forecast. With this in mind, Ericsson experts have revised their forecast for the number of global 5G connections in 2020 upward. "The demand for 5G technologies should be judged not so much by the successful indicators of the number of connections, but by the opportunities that they will provide for people and business. 5G technologies are designed for innovation, and the current crisis has demonstrated the real value of communication networks and their possible role in economic recovery," said Fredrik Jejdling, Executive Vice President and Head of Communications Networks at Ericsson.
- T-Mobile US (TMUS)
T-Mobile US, Inc. - a US wireless operator owned by Deutsche Telekom (DT).
T-Mobile was the first company in the industry to launch a standalone 5G network, thus continuing to conquer the market with next-generation wireless technologies.
The launch of the network was announced on the blog. Until now, T-Mobile has already had a 5G network with considerable coverage, but the launch of a new autonomous network will significantly expand coverage. The 5G network, owned by the operator, currently covers an area of 250 million people, which is 30% more than the previous coverage.
According to T-Mobile, the new network will allow it to use all its coverage in the 600 MHz band for 5G communications. To increase coverage and ensure the penetration of the signal into the depths of buildings the company goes beyond the use of a medium-range signal.
Earlier, in late 2019, the company launched a nationwide 5G network, the coverage of which, according to T-Mobile, exceeded that of its competitors. However, due to the wider coverage of the transmitters, the speeds in this network were lower than the gigabit speeds typical of 5G networks.
- Apple (AAPL)
Apple Inc. is one of the leaders in the global IT industry - manufacturer of computers, laptops, media players, and various software. Apple is one of the pioneers of the industry, which has been a breakthrough in many areas: the first truly personal computers, the first multi-color displays on a PC, the first operating systems with a graphical interface, the first computers with mouse support, the first personal audio player, the first online music store ... the list of innovations Apple Corporation can go on for a long time.
Last year, the smartphone industry showed a decline. In 2019, there were several 5G smartphones on the market, but this year was supposed to be the year when the market will reach a critical mass. It is expected that Apple will be the largest beneficiary of the 5G smartphone boom in 2020. The iPhone maker has reinvented a new pricing strategy, which will be useful this year. As expected, all iPhones that will appear on the market this year will support 5G, including two economy class models.
Moreover, this year Apple also plans to release the iPhone SE 2 at a price of only $399. The company may make a major coup in the market if it manages to pack 5G into its cheapest offer. Leaky supply chain information indicates that Apple may resort to a multi-level approach to pricing and allow consumers to buy the iPhone SE 2 with support for 5G at a price above the basic model.
Not surprisingly, Apple is expected to dominate the 5G market. According to sources of Nikkei Asian Review, in 2020, Apple plans to ship 80 million 5G smartphones. Similarly, the analytical company Strategy Analytics also expects that Apple will take first place among manufacturers of smartphones with 5G support.
Another reason why Apple will be the winner of this year's 5G race is that the company has a huge installed base, which is reportedly waiting to be updated before the new smartphone.
Wedbush Securities estimates that 350 million iPhones out of the 900 million installed bases are ready for the upgrade. Of these, 200 million iPhones may begin updating to 5G starting this year.
All this makes Apple the best 5G stock to buy to take advantage of the 5G revolution for smartphones.
- Applied Materials (AMAT)
Applied Materials is known for supplying semiconductor manufacturing equipment for chip manufacturers, which gives them a great opportunity to take advantage of the 5G market opportunities. Chipmakers will have to upgrade their infrastructure to be able to build chips that can handle the increased loads on the network.
It is expected that 5G networks will provide ten times higher data transfer speeds than 4G networks. As a result, telecom operators and data center operators are assumed to undertake a major upgrade cycle. For example, according to Applied Materials forecasts, out of 1.7 million base stations in China, only 10,000 will be able to cope with 5G this year.
Consequently, Applied Materials expects its customers to buy more components to produce chips capable of handling the increased load caused by 5G networks. CEO Gary Dickerson pointed to the same facts at a recent conference call. He said that "the strong investment from customers, driven by demand in key regions and the acceleration of 5G development," gives him optimism about the company's performance in 2020.
The good part is that growing demand driven by 5G will sooner or later have a positive impact on Applied Materials' financial performance, as foundry customers account for just over half of the company's total revenue. The company's revenue fell 13 percent in fiscal 2019, but its latest guidance shows that the process has already started. The company expects sales this quarter to be between $4.4 billion and $4.8 billion, with earnings between $1.11 and $1.23 per share.
Analysts are expecting revenue of $4.36 billion on earnings of $1.02 per share, so the company is on the verge of recovery thanks to expected growth in 5G deployments. That makes the company a tempting bet as its stock is trading at an expected profit divisible by just 16.
How to Invest in 5G Stocks
So, we have learned what 5G technology is and which companies and how they will benefit from that. Now it's your turn to take advantage of the best 5G stocks and start trading CFDs on the abovementioned assets. Let's see how it can be done using the best 5G stocks to invest in.
The first and most important aspect is the trading account with the best CFD broker. If you still do not have an account, it will take you just a couple of minutes to create one. Make sure to fill in all the fields with the correct information so no issues will pop-up later. Once the account is created, an email with further instructions and login details will be sent to the email address you specify.
The next step is the trading terminal, the platform you will use for placing orders. If, for some reason, you do not have it yet, download it over here and follow the instructions of the installation wizard. It's super easy, just click NEXT several times, and you are good to go. When done, just run the platform and login with the login and password that were to your email address right after the registration.
Now the trading itself. Click on the Market Watch and scroll the list down till you find the company needed. For example, Apple. Double-click on the name of the company, and you will see the New Order window. It is what you need to pay special attention to. Now you need to set the volume of the trade (how many shares you want to buy), set the Stop-Loss and Take-Profit, and click on the Buy by Market button. Not that complicated, right? Good luck!
