Here are eight stocks benefiting from the 5G boom.
In the past few years, 5G has transitioned from a trendy tech buzzword to one of the largest near-term growth trends on Wall Street. Wireless providers are rolling out 5G networks all over the world. These next-generation networks allow for faster, higher-quality internet connections; greater global connectivity; increased capacity for advanced connected software applications; and less latency for users. Multinational telecom company Ericsson estimates that there will be 4.4 billion 5G subscribers by the end of 2027 thanks to network expansions in China and North America and new 5G-enabled device launches. Here are eight of Bank of America’s top 5G stocks to buy.
Verizon Communications Inc. (ticker: VZ)
When it comes to 5G winners, network carriers are at the top of the list. Verizon recently said its 5G network will cover 100 million people in more than 1,700 cities by the end of January 2022. The company may need to revise that estimate after it agreed on Jan. 18 to pause its 5G rollout plans near some U.S. airports, but that hiccup affects a small portion of its service area. Analyst David Barden says Verizon has the most defensible customer base and the most profitable business of any of the big three U.S. wireless providers. Barden says asset divestments have improved the company’s balance sheet, and Verizon shares also pay a 4.8% dividend. Bank of America has a “buy” rating and a $64 price target for VZ stock, which closed at $53.50 on Jan. 19.
Digital Realty Trust Inc. (DLR)
Digital Realty Trust is Barden’s top 5G data center stock pick for 2022. Barden says Digital Realty’s exposure to emerging growth markets in Africa, Asia and India will help the company outperform peers in 2022 and beyond. Digital Realty recently announced plans to acquire a 55% stake in African data center provider Teraco Data Environments Pty. Ltd. for about $1.73 billion, and Barden says Teraco will give Digital Realty a “dominant footprint in a high growth market.” Barden says Digital Realty has also successfully navigated rising power prices in recent quarters. Bank of America has a “buy” rating and a $190 price target for DRT, which closed at $154.93 on Jan. 19.
Equinix Inc. (EQIX)
Equinix is the world’s largest data center operator. Barden says Equinix’s September acquisition of GPX India Pvt. Ltd. will help the company tap into the growing South Asian market. In November, Equinix announced a partnership with Dish Network Corp. (DISH) to provide connectivity infrastructure for Dish’s 5G network. Barden says network-neutral co-location will drive growth for Equinix thanks to its unique market positioning. He says the stock is undervalued given the company’s strong and highly visible growth outlook and the stickiness of its current business. Bank of America has a “buy” rating and an $865 price target for EQIX stock, which closed at $730.49 on Jan. 19.
SBA Communications Corp. (SBAC)
SBA Communications operates 5G wireless communications towers and is Barden’s top 2022 stock pick among tower operators. Barden says carriers will spend aggressively to expand their 5G networks this year, which is great news for tower operators. SBA generates more than 80% of its revenue from the U.S. market, making it better positioned for the 2022 5G ramp-up than other international tower companies. In addition, Barden says SBA is relatively insulated from regulatory headwinds, rising interest rates and the ongoing pandemic and has best-in-class assets. Bank of America has a “buy” rating and a $365 price target for SBAC stock, which closed at $321.23 on Jan. 19.
Ciena Corp. (CIEN)
Ciena is one of analyst Tal Liani’s top 5G network infrastructure picks for 2022. Liani says Ciena’s revenue growth will increase from 2.5% in 2021 to 12% in 2022 thanks in part to booming bandwidth demand from the telecom sector. Liani says Ciena is the best investment in optical networking. Amazon.com Inc. (AMZN), Meta Platforms Inc. (FB), Alphabet Inc. (GOOG, GOOGL) and Microsoft Corp. (MSFT) accounted for more than $1 billion of Ciena’s orders in 2021, and the company expects aggressive spending from web-scalers in the next few years. Bank of America has a “buy” rating and a $91 price target for CIEN stock, which closed at $68.21 on Jan. 19.
F5 Inc. (FFIV)
F5 is Liani’s other top 5G network infrastructure stock pick. He says F5 has multiple catalysts that could potentially drive revenue growth acceleration this year, including aggressive data center investments and an uptick in software revenue stemming from three-year contract renewals. Liani says F5’s impressive growth numbers are a testament to its successful transition from hardware sales to software sales. In addition, F5 is expanding its security portfolio, and recent acquisition Threat Stack Inc. should add about $15 million in fiscal 2022 revenue. Bank of America has a “buy” rating and a $285 price target for FFIV stock, which closed at $222.80 on Jan. 19.
American Tower Corp. (AMT)
American Tower is a specialized real estate investment trust that owns a portfolio of wireless communications towers. Barden says towers are a critical and stable part of the wireless network infrastructure, making stocks such as AMT excellent long-term investments. American Tower has also been expanding its holdings into the data center market. Wireless subscriber and usage growth are tail winds for AMT, and Barden says the company has the most conservative balance sheet among its peers. On top of that, AMT shares pay a 2.2% dividend. Bank of America has a “buy” rating and a $315 price target for AMT stock, which closed at $249 on Jan. 19.
Marvell Technology Inc. (MRVL)
Marvell Technology is a semiconductor company that serves the data storage, communications and consumer markets. Analyst Vivek Arya says Marvell’s 5G network opportunity is still in the early stages and projects that the company’s annual 5G revenue run rate will increase from less than $600 million in late 2021 to $800 million by the end of 2022. Arya says Marvell’s stock trades at a valuation premium to its semiconductor peers, but that premium is more than justified by the company’s best-in-class 33% compound annual earnings growth rate. Bank of America has a “buy” rating and a $115 price target for MRVL stock, which closed at $76.89 on Jan. 19.
8 best 5G stocks to buy in 2022:
— Verizon Communications Inc. (VZ)
— Digital Realty Trust Inc. (DLR)
— Equinix Inc. (EQIX)
— SBA Communications Corp. (SBAC)
— Ciena Corp. (CIEN)
— F5 Inc. (FFIV)
— American Tower Corp. (AMT)
— Marvell Technology Inc. (MRVL)
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8 Best 5G Stocks to Buy in 2022 originally appeared on usnews.com
Update 01/20/22: This story was previously published at an earlier date and has been updated with new information.
