5G Technology is expected to revolutionize communications worldwide through low latency connectivity and faster data transmission speeds than any other technologies. The rise in the number of IoT devices, widespread adoption of edge computing, and a surge in demand for content streaming services and industrial automation are driving the growth of the 5G standard globally.
Indeed, the global 5G technology market is projected to reach $667.90 billion by 2026, registering a CAGR of 122.3% beginning this year. Companies are now racing to integrate 5G services with satellite communications and to increase their strategic partnerships to exploit the new standard.
With the scramble in connection with this wireless transition now underway, we think 5G companies such as Telefonaktiebolaget LM Ericsson (ERIC) and Skyworks Solutions, Inc. (SWKS) are well-positioned to exploit burgeoning opportunities. With deep customer engagements, underpinned by decades of technology investments and scale, these stocks are uniquely positioned to lead the market.
Telefonaktiebolaget LM Ericsson (ERIC)
ERIC provides information and communications technology solutions through the following segments: Networks, Digital Services, Managed Services, and Emerging Business. The company’s offerings include cloud services, software, and infrastructure for broadband and telecommunications.
On January 26, ERIC launched a 5G network slicing solution for radio access networks (RAN) that will enable communications service providers to deliver customized 5G services to consumers and enterprises. This newly launched scalable and flexible architecture is expected to spur ERIC’s 5G business growth.
ERIC’s net sales have increased 4.8% year-over-year to SEK69.59 billion in the fourth quarter ended December 31, 2020. Its operating income has increased 79.7% from the year-ago value to SEK11 billion, while its EPS has improved 68.7% over the three-month period to $2.26.
Analyst expects ERIC’s revenues to rise 26.9% year-over-year in the first quarter ending March 31, 2021. A consensus EPS estimate for the current quarter represents a 75% rise from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 61% over the past year.
The stock has an overall rating of A which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ERIC has a grade of B for both Growth, Value, and Sentiment. In the 56-stock, B-rated Telecom - Foreign Industry, it is ranked #2. In total, we rate ERIC on eight different levels. Beyond what we stated above, we also have given ERIC grades for Stability, Quality and Momentum. Get all ERIC’s ratings here.
Skyworks Solutions, Inc. (SWKS)
SWKS produces semiconductors for handsets and other devices that are used to enable wireless connectivity. The company sells its products for use in the aerospace, automotive, cellular infrastructure, industrial, medical, military, smartphone, and wearable markets.
On January 1, SWKS partnered with Asus to develop and launch the world’s first ultra-fast Wi-Fi 6E extended band router. The router will be designed to enable faster connectivity and support an increased number of connected users to meet the unprecedented and growing demand for video conferencing, online gaming, streaming TV, and online exercise apps.
A day later, the company announced that it has achieved a significant milestone with the shipment of over one million of its 5G Power Amplifiers (PA). This underscores how SWKS’ is accelerating the adoption of 5G by enabling enhanced 5G connections and powering a more efficient range extension for small cells base stations.
SWKS’ net revenues have increased 68.5% year-over-year to $1.51 billion in the fiscal first quarter ended January 1, 2021. Its non-GAAP operating income has increased 97.2% from the year-ago value to $622 million, while its non-GAAP EPS improved 100% over the three-month period to $3.36.
Analyst expects SWKS’ revenues to rise 75.4% year-over-year to $1.15 billion in the second quarter ending March 31, 2021. A consensus EPS estimate of $2.35 for the current quarter represents a 75.4% rise from the year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 49.6% over the past year.
It is no surprise that SWKS has an overall rating of B, which equates to Buy in our POWR Ratings system. SWKS has a grade of B for Growth, Sentiment, Quality and Momentum. In the B-rated, 96-stock Semiconductor & Wireless Chip Industry, it is ranked #11.
Click here to see the additional POWR Ratings for SWKS (Stability and Value).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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ERIC shares were trading at $13.27 per share on Monday morning, up $0.12 (+0.91%). Year-to-date, ERIC has gained 11.05%, versus a 4.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands.
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