Here are seven stocks benefiting from the 5G boom.
The rollout of 5G wireless networks and 5G-compatible devices is one of the largest long-term growth trends in the tech world today. Fifth-generation wireless networks will enable faster, higher-quality internet connections, more global connectivity, higher capacity for advanced connected software applications and less latency for internet users. Bank of America says wireless infrastructure deployment cycles have historically lasted about a decade. The world is only about 2.5 years into the current cycle, suggesting there are more than seven years of 5G investment opportunities ahead. Here are seven of Bank of America’s top 5G stocks to buy.
Marvell Technology (ticker: MRVL)
Marvell Technology is a semiconductor company that provides solutions for the data storage, communications and consumer markets. Analyst Vivek Arya says 5G is only one of several massive growth drivers for the company, including cloud services and next-generation auto tech. In addition, Arya says revenue synergies from Marvell’s buyout of Inphi will boost its overall numbers in coming quarters. Enterprise reopenings are a near-term tailwind, and Arya projects that the company could hit $3 in annual earnings per share in the long term. Bank of America has a “buy” rating and a $62 price target for MRVL stock.
Analog Devices (ADI)
Analog Devices makes high-performance integrated circuits used in signal processing applications. Bank of America estimates that Analog Devices has four times as much content in 5G radios as it did in 4G radios. Arya says Analog has long-term growth opportunities in 5G communications, automotive technology and industrial markets. At the same time, he says the company has “best-in-class” free cash flow growth and gross margins that have recently exceeded management’s long-term target of 70%. Auto segment battery management revenue also doubled in the first quarter. Bank of America has a “buy” rating and a $178 price target for ADI stock.
Qualcomm is a semiconductor company that specializes in advanced wireless broadband technology. Qualcomm is also the market leader in producing 5G modems. Analyst Tal Liani says 5G deployment rates and subscriber growth are tracking about two years ahead of the pace of 3G and 4G deployments. Qualcomm management has said it believes the 5G life cycle will be longer than the typical 10-year network cycle given the more complex technology involved. Meanwhile, Qualcomm’s supplier relationship with Apple (AAPL) remains a cash cow. Bank of America has a “buy” rating and a $200 price target for QCOM stock.
Teradyne designs automated semiconductor, telecommunications and industrial testing equipment. Arya says the complexity of 5G network testing creates a unique 5G exposure for Teradyne. The company is the market leader in semiconductor testing and has both a strong balance sheet and a long-term growth runway ahead, he says. He projects that the company could reach $9 in annual EPS by 2025 as semiconductor product complexity increases and industrial automation expands. Teradyne is also gaining market share in the system-on-a-chip and memory markets. Bank of America has a “buy” rating and a $155 price target for TER stock.
Qorvo manufactures radio frequency integrated circuits for wireless communications applications. The company has diverse exposure to 5G handsets and a solid portfolio of wireless infrastructure products. Arya says Qorvo’s impressive Wi-Fi sales and improving 5G product mix are ramping up its profitability, and he says investors aren’t fully appreciating the company’s improving gross margin profile relative to peers. The company projects record free cash flow margins and has a solid balance sheet that helps support its new $2 billion share buyback program. Bank of America has a “buy” rating and a $215 price target for QRVO.
Broadcom is one of the world’s largest diversified analog semiconductor device suppliers. Arya says Broadcom investors have solid visibility through 2022 given orders for next year are already well booked. He says many of the company’s current growth drivers will likely extend into next year as well. Broadcom also pays a 3% dividend, a rarity among tech growth stocks. Arya says Broadcom is attractive to both growth and income investors, given it is on track for 10% revenue growth and 15% EPS growth through at least 2023. Bank of America has a “buy” rating and a $580 price target for AVGO stock.
NXP Semiconductors (NXPI)
NXP Semiconductors specializes in high-performance, mixed-signal chips used in end markets such as the auto and mobile payment industries. NXP is a leader in 5G power amplifiers and is also Arya’s top auto semiconductor stock pick. Arya says communication demand growth will accelerate in the second half of 2021 as 5G build-outs rise. He says NXP also has a strong balance sheet and more than 20% free cash flow growth, which allows for flexibility on buybacks, dividend hikes and potential acquisitions down the road. Bank of America has a “buy” rating and a $240 price target for NXPI stock.
Seven best 5G stocks to buy in 2021:
— Marvell Technology (MRVL)
— Analog Devices (ADI)
— Qualcomm (QCOM)
— Teradyne (TER)
— Qorvo (QRVO)
— Broadcom (AVGO)
— NXP Semiconductors (NXPI)
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