27th Apr 2021
There’s a lot of talk about 5G across the business and investment world, as well as in general news stories. Investors who want a piece of the cutting edge of tech advances and innovation are excited by the potential of 5G, but there’s also a solid investment case for choosing to invest in 5G stock.
5G stands for 5th generation, since this is the 5th global wireless standard. 5G is expected to impact on connectivity in three main ways: by speeding up data transfers across wider channels; by lowering latency to cut response times; and by improving functionality to link many more devices such as sensors and smart devices. A number of telecommunications companies have been developing 5G networks for years, and many have already been launched around the world, most notably in South Korea, which established a nationwide 5G network in 2019.
The Global Mobile Suppliers Association (GSMA) reports that 5G networks have been established by 113 mobile operators across 48 countries, and predicts that operators will spend $890 billion on 5G networks over the next five years1. Governments, corporations, and organizations worldwide are signaling their commitment to 5G rollout. In the US, President Biden recently announced $100 billion funding for digital infrastructure and $50 billion to strengthen US leadership in the semiconductor industry, a key enabler of 5G tech; the EU committed to offering uninterrupted 5G coverage in urban areas and along main transit pathways by 20252; and Canada, Japan, Singapore, China, and India are among countries that began rolling out 5G networks in 20203. Consumer 5G adoption is expected to reach 20% of global mobile connections by 20254.
It’s worth noting that analysts predict it will take some years before we see the full impact of 5G, because it takes time to develop new tech that takes full advantage of 5G’s next gen capabilities. 4G followed such a trajectory: although it launched in 2010, world-altering 4G applications didn’t appear until 2 or 3 years later. “5G is an investment for the next decade, and in previous mobile transitions, we’ve seen most of the big changes happening years after the first announcement,” writes Sascha Seagen, PCMag’s lead mobile analyst5. Qualcomm similarly expects to see 5G’s full economic impact materialize by 20356, which makes 5G network stocks a sector to invest in for the long term.
Consumers are looking forward to 5G for faster gaming and swifter downloading times, but the potential of 5G goes way beyond consumer enjoyment. Business and industry thought leaders predict that through the expansion of the Internet of Things (IOT), mobile broadband, and by enabling remote mission critical services (MCS), 5G could transform the automotive industry, manufacturing, and medicine. For example, 5G has the potential connect smart machinery of all types, enabling smart cities, smart factories, smart hospitals, and more. Additionally, COVID-19 accelerated the remote work trend, and it’s unlikely that it will be fully reversed even as the pandemic recedes. 5G supports the smooth communication, collaboration, and large-scale data sharing that make WFH possible.
Other use cases for 5G include:
- Autonomous vehicles, which could dramatically improve road safety.
- Smart grids, which cut power wastage and unnecessary power consumption by monitoring and controlling the way that energy is stored, distributed, and sold.
- IoT devices, which have numerous use cases including enabling automated production lines, increasing employee safety, and raising global tracking and tracing for crucial items like pharma products.
- Edge computing, which improves response times, reduces bandwidth use, and enables better automation and coordination between systems.
- Smart healthcare, including better mobile health devices, improved data sharing between healthcare professionals, and personal health monitoring.
- Unmanned autonomous vehicles (UAVs), including delivery drones, and surveillance and inspection drones for crucial infrastructure.
- Artificial Intelligence assisted-living activities that support users through their daily activities.
5G could also trigger the emergence of new and original business models that are hard to conceive before the networks are widespread, driving business growth to new levels. Research by Qualcomm calculated that 5G could generate $13.1 trillion dollars of global economic output, create 22.8 million new jobs, and produce $265 billion of global 5G CAPEX and R&D annually over the next 15 years7.
Taken together, analysts view 5G adoption as unstoppable and predict that it will drive growth in ways that are hard to quantify in advance, making it a positive investment option for tech-minded investors and those who want to be part of the next generation of innovation. If you’re interested in being part of the 5G revolution, here are possibly some of the best 5G stocks to buy now.
- Defiance 5G ETF (FIVG)
As an ETF (exchange-traded fund) rather than a single stock, FIVG, issued by Defiance ETFs, effectively enables you to invest in a number of different 5G companies stock rather than selecting a single 5G company. ETFs are similar to mutual funds, but can be traded at any time like a stock itself.
FIVG was the first 5G ETF, and has an expense ratio of 0.30%. It tracks the BlueStar 5G Communications Index, a rules-based, weighted index that follows the performance of around 73 US-listed stocks for global companies involved in the rollout of 5G networks. FIVG’s 74 holdings include top 5G stocks like Qualcomm, Nxp Semiconductors N V (NXPI), Ericsson (ERIC), Analog Devices Inc (ADI), and T-mobile US (TMUS).
A 5G ETF like FIVG makes it possible for investors to enjoy broad investment across multiple promising 5G stocks, helping to mitigate the risk of overexposure. FIVG’s share price is currently $36.17, down 0.25%. The share price has climbed steadily over the past 12 months.
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- Skyworks Solutions Inc. (SWKS)
Skyworks Solutions Inc is a relatively small company that could be one of the most promising 5G stocks to buy right now. Skyworks produces high-performance analog semiconductors, which are the vital chips that power next-gen 5G platforms, self-driving vehicles, IoT ecosystems and connected machines for factories, medical companies, and smart home devices.
Skyworks has seen impressive growth recently, rising 23% since the start of the year and 15% since the end of Q1 2021, thanks to strong first quarter results and high demand from Apple, which is its biggest customer. Its stock price is currently $197.23, down 0.87%,
- Qualcomm (QCOM)
Qualcomm is among the most exciting 5G stocks, partly because it’s involved in 5G networks in two ways: It manufactures software and semiconductor chips that it designs and makes and has also deevlopedlicensed 5G wireless technologies. Qualcomm chips are used in everything from smartphones to modems to IoT devices and smart machinery. Additionally, as 5G adoption expands, Qualcomm sees more revenue from licensing sales.
In 2020, Qualcomm signed an important deal with Apple to supply the chips for its 5G iPhone 12 models. Qualcomm is considered an established investment for 5G investors, with sufficient cash runway to fund ongoing innovation and a solid history of paying dividends. Bank of America set a $165 price target for Qualcomm stock, which is already up 38% year-to-date. Qualcomm stock price is currently $139.43, up 0.99%.
- American Tower Corp. (AMT)
American Tower is the largest owner and operator of wireless communication towers in the world, controlling over 90% of cell phone and telecommunications business in the US. American Tower real estate is crucial for mobile networks and internet infrastructure in general, not just 5G, but it’s certainly benefiting from the 5G boom. It’s seen as a mission critical business, leading analysts to consider it a relatively low-risk investment and one of the best 5G stocks.
Some analysts predict that prices will rise for 5G rentals, to reflect the greater size and weight of 5G antenna and other equipment. American Tower recently announced a 15-year master lease agreement with T-Mobile, and it has a “buy” rating and $280 price target from Bank of America. The stock is up around 6% year-to-date, and stock price is currently $246.71, up 0.46%.
- Telefon AB L.M. Ericsson (ERIC)
Based in Sweden, Ericsson is one of the main suppliers of network equipment and software for wireless carriers. Ericsson positioned itself well to lead the market when it included 5G software-upgradeable equipment in its 2015 portfolio refreshment, and it’s gaining a leading share in critical markets such as China, Australia, the US, and Germany, with 81 deals signed by February 2020. Ericsson is the first company to deploy 5G networks on four continents.
Ericsson is one of the best cheap 5G stocks to buy, with a current stock price under $14, which makes it a good choice for investors looking for lower-priced 5G stocks. It’s been given a “buy” rating and a price target of $14.30 by Bank of America, and has a solid history of paying out dividends consistently.
- T-Mobile US (TMUS)
After its merger with Sprint, T-mobile is the US’ third-largest wireless carrier, but it’s leading the way when it comes to the 5G rollout. It’s widely seen as one of the top 5G companies to invest in now, after a very positive performance in 2020. The company is the first carrier to offer 5G nationwide and operates the largest and fastest 5G network in the US, which is generally perceived as giving it a spectrum advantage over its competitors.
T-mobile recently launched a new cellphone plan that offers users’ unlimited 4G and 5G data, further pushing its standing. The company has a “buy” rating and $130 price target from Bank of America, and the stock price is currently $130.02, down 1.07%.
All statistics and prices as of April 7, 2021.
Click here for the FIVG Fund prospectus.
1 “5G roll-outs to continue apace in 2021,” Aaron Tan, December 21, 2020 https://www.computerweekly.com/news/252493941/5G-roll-outs-to-continue-apace-in-2021
2 “Commission concedes delay in 5G deployment across EU,” Samuel Stolton, September 18, 2020 http://www.euractiv.com/section/5g/news/commission-concedes-delay-in-5g-deployment-across-eu
3 “5G Availability Around the World: Most countries already have limited access to 5G networks,” Tim Fisher, February 03, 2021 http://www.lifewire.com/5g-availability-world-4156244
4 “5G roll-outs to continue apace in 2021,” Aaron Tan, December 21, 2020 www.computerweekly.com/news/252493941/5G-roll-outs-to-continue-apace-in-2021