5G, the next iteration of wireless connection technology, is here; it’s been real for several years now, but according to some industry analysts, it will live up to its own legend this year. Some numbers will tell the story.
New 5G networks have been growing since the technology was introduced in 2017 – and during the last two years, that growth has been accelerating. In 2019, only South Korea had active 5G networks beyond an introductory scale. Today, there are over 165 5G networks, active in 65 countries. This momentum has become self-sustaining; as 5G networks expand, so does demand, and the pandemic had a booster effect on wireless connectivity tech.
That 5G expansion is opening up opportunities. According to the GSMA Association, the voice of the telecom industry, investors can expect to see $900 billion worth of new telecom investments by 2025, with four-fifths of that total being in 5G tech.
That kind of money will open up plenty of chances to stock investors to realize gains on 5G moves. Using TipRanks’ database, we identified two stocks that stand to gain as the world shifts to 5G. These Buy-rated equities both features plenty of upside potential, but otherwise, they are very nearly polar opposites. Let’s take a closer look.
CommScope Holding (COMM)
We’ll start with CommScope Holding. This company has a clear path into 5G – its main products are hardware for network infrastructure. CommScope produces antennas used in tower and building installations, base stations for network transmitters, and outdoor wireless power supplies. These products are produced and marketed by subsidiaries; CommScope is the holding company connecting them together.
The connection to 5G is obvious; the new networks will require a tremendous array of new hardware in the buildout, a buildout that is already underway and gaining strength – and CommScope is already positioned to take a part in it. The company is already producing and marketing an array of products for 5G enabled hardware.
Earlier this month, CommScope released its second-quarter earnings report. The report showed a modest 4% yoy growth in revenues, to $2.19 billion. The net loss per share, at 82 cents, was much improved from the $1.71 EPS loss reported in the year-ago quarter.
However, supply chain headwinds are leading the company to be cautious about 2H EBITDA and FCF outlook relative to 2H20. These headwinds spooked investors and are likely to blame for the major sell-off that followed the earnings announcement.
Credit Suisse analyst Sami Badri, however, remains unfazed by cries of supply-chain constraints. Badri rates COMM an Outperform (i.e. Buy), and his $23 price target suggests room for ~55% upside this year. (To watch Badri’s track record, click here)
“…the company remains positioned well for 5G deployment densification efforts by telcos, network extensions with cable companies, data center build outs with clouds/multi-tenant data centers, and RDOF… Given COMM’s product indexation to strong end market trends, including 5G, RDOF, digital infrastructure growth, and cable network densification, we continue to identify COMM as a key thematic beneficiary to these themes and at an attractive valuation,” Badri opined.
Overall, this is a stock with a Strong Buy consensus rating, based on 6 reviews that include 5 to Buy and 1 to Hold. CommScope has an average price target of $24.40, implying ~65% share growth in the next 12 months. (See COMM stock analysis on TipRanks)
Dish Network (DISH)
This Colorado-based tech firm is a leader in direct TV, offering its customers television service via satellite broadcast. In addition, Dish has also moved into the prepaid wireless mobile niche, and to that end acquired Boost Mobile last year, integrating the wireless company’s 8.89 million customers.
Dish has a strong presence in wireless connectivity, on top of its satellite TV service, it acquired Boost as part of a 2019 agreement with Sprint, which saw Dish gain Sprint’s prepaid wireless service. The company is also a mobile virtual network operator with AT&T. Dish is working to build out its own 5G network, as part of its Dish Wireless services. Dish currently has 8.9 million wireless subscribers.
In its recent financial report, Dish reported first half results for 2021. The company saw $8.98 billion in revenue for the first six months of the year, a substantial increase from the $6.4 billion reported in the first half of 2020. Total net income was $1.3 billion, which compared favorably to the $525 million in the same period of 2020. Dish’s six-month EPS was $2.05, more than double the 90 cents per share reported one year earlier.
Deutsche Bank analyst Brian Kraft covers Dish, and he sees the company’s move into 5G service as a net plus. Kraft writes, “DISH’s 5G network capex is starting to ramp up, reaching $200M this quarter, and the company noted that its wireless network investment is set to ‘increase substantially throughout the remainder of 2021,’ and adds also that the agreement with AT&T “[enables] DISH over the medium to long term to direct its network investment dollars towards the highest return opportunities, including dense urban markets and the 5G enterprise opportunity, while relying on its MVNO partner for coverage in smaller and rural markets…”
Kraft rates DISH as a Buy, with a $77 price target that implies an upside of 80% for the year ahead. (To watch Kraft’s track record, click here)
All in all, DISH holds a Moderate Buy rating from the analyst consensus, based on 6 Buys, 4 Holds, and 1 Sell set in recent weeks. The stock is selling for $42.70, and the $52.55 average price target suggests it has room for 23% growth in the next 12 months. (See DISH stock analysis on TipRanks)
To find good ideas for 5G stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
