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Three 5G Stocks That’ll Gain from the Future of Connectivity
Stock Analysis & Ideas

Three 5G Stocks That’ll Gain from the Future of Connectivity

Story Highlights

As countries around the world race to adopt 5G and the technology itself looks set to connect everything globally, we highlight three stocks in the space that are gaining major ground.

The promise of 5G is changing the world fast. The technology offers high speeds, scalability for applications, and accommodation for a large number of connected devices. Further, 5G promises to transform a number of industries, including automotive, manufacturing, gaming, health care, mobile computing, and drones. We used the TipRanks comparison tool to put the spotlight on three names, Qualcomm (QCOM), Nokia (NOK), and Skyworks Solutions (SWKS), which are at the forefront of this revolution.

Qualcomm

Shares of Qualcomm have fallen modestly over the past month despite the company registering 36% top-line growth and 54% bottom-line growth in its third quarter, as its guidance failed to impress the Street.

Qualcomm is a leading name in wireless technology globally, and its chips, software, and other services are deployed across network and broadband gateway equipment, consumer devices, IoT, and connected devices.

Qualcomm is transforming itself into a connected processor company from a communications company. It is forging major industry partnerships. Its Snapdragon platforms will be used in Samsung’s Galaxy products globally under a multi-year partnership. The agreement includes 3G, 4G, and 5G technologies and will also utilize future 6G products.

Further, its Snapdragon Digital chassis is gaining ground in the automotive sector, and after its design win with Volkswagen (DE: VOW), Qualcomm’s automotive design pipeline now stands at $19 billion.

Moreover, Qualcomm has announced two new 5G robotics platforms that will cater to robotics, drones, and more. Finally, Qualcomm has also teamed up with France’s Thales (DE: CSF) and Sweden’s Ericsson (ERIC) to bring 5G global connectivity via low earth orbit (LEO) satellites. The move promises to keep a user connected even in the remotest parts of the planet.

What is the Target Price for Qualcomm Stock?

KeyBanc’s John Vinh has reiterated a Buy rating on the stock alongside a price target of $220, implying 50.4% upside potential. Vinh anticipates that the company’s foray into non-phone markets will bear fruit.

The consensus rating for Qualcomm is a Moderate Buy with an average price target of $189.85, implying 31.2% upside potential. The stock currently has a ‘Perfect 10’ on TipRanks Smart Score rating system, suggesting that it could outperform the broader market in the coming periods.

Nokia

Shares of this wireless and fixed-network equipment provider have dropped 21.3% so far in 2022, but the company has been scoring major deal wins for a while now. Its recent quarterly numbers were marked by ~11% growth in its profits and revenues. Additionally, Nokia remained confident of hitting its 2022 guidance.

The company is seeing robust 5G demand from telecom operators while its core business units (Mobile Networks and Network Infrastructure) are gaining traction.

India remains one of the major markets for 5G, and this month, Nokia bagged a multi-year deal with India’s Airtel for 5G radio access network (RAN). Nokia has also teamed up with AST SpaceMobile (ASTS) in a five-year 5G deal to use Nokia’s AirScale Single RAN in AST’s satellites to expand coverage around the world.

Further, the company is also making gains in private wireless and already caters to 485 clients. Nokia CEO Pekka Lundmark believes the world is still in the early cycle of 5G, and consequently, the company’s 5G wins across major geographies such as Norway, Taiwan, and Mexico put it on a strong footing.

Finally, the company remains focused on innovation. Earlier this year, Nokia, in partnership with Elisa and Qualcomm, hit a 5G uplink speed of 2.1GBPS on the mmWave spectrum. The technology is expected to be deployed next year at venues such as stadiums. Nokia has also joined hands with DOCOMO and NTT DATA (NTTDF) to develop technologies for 6G.

What is NOK’s Price Target?

Nokia, too, has a ‘Perfect 10’ Smart Score, while Raymond James analyst Simon Leopold sees 38.1% upside potential in the stock based on a price target of $7 alongside a Buy rating.

The consensus rating for the stock is a Moderate Buy, with the average NOK price target of $6.34 implying 25.1% upside potential.

Skyworks Solutions

The third name on our list is catering to the demand for wireless networking with its analog semiconductors. Its solutions are used in a number of industries, including aerospace, broadband, gaming, automotive, defense, wearables, and connected devices.

Skyworks’ third-quarter performance showed 10% revenue growth and an 11% dividend increase. Additionally, the company expects double-digit growth in the next quarter.

The company’s array of 5G solutions includes the Sky5 Platform, the Sky5 Ultra 5G cellular architecture, and the Sky5 LiTe mass-market offering for universal deployment. In Q3, it delivered the Sky5 platforms to some of the leading names, such as Google (GOOGL) and Samsung (DE: SSU), launched 5G solutions with Verizon (VZ), and clinched design wins in Europe.

Significantly, the company’s Chairman, CEO, and President, Liam Griffin, expects data consumption to keep expanding, with 27% annual growth expected in global wireless data traffic over the next five years. 

Is Skyworks a Good Stock to Buy Now?

While Skyworks scores a 7 out of 10 on TipRanks’ Smart Score, BMO Capital’s Ambrish Srivastava has reiterated a Buy rating on the stock, alongside a $135 price target. This signals 24.5% upside potential. Overall, the Street has a Moderate Buy consensus rating on the stock, with the average SWKS price target of $132.60 implying 22.3% upside potential.

Conclusion: 5G is Powerful, and These Stocks Can Benefit

5G could potentially change the way people live, work, and engage by making everything connected, and the stocks mentioned above are at the forefront of this wave. Excluding China, the global penetration for 5G currently stands at only 15%, and these names stand to gain as this metric improves over the coming periods.

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