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5 Stocks to Gain Bigger as 5G Makes the World Smaller

As the curtains gradually roll over an eventful 2020, the world eagerly awaits a new year that would likely eliminate the coronavirus menace and mark a fresh beginning for mankind. The pandemic has highlighted the need for high-speed, high-bandwidth and low-latency connections — the hallmarks of the 5G network — for digital sustainability. With digital sustainability being the norm of the day, telecom firms have aided countless people with increased 5G deployments as virtual communication replaced in-person exchanges with social distancing and the work-from-home option in vogue.

The fifth generation of cellular technology, or 5G, has fast-tracked the wide proliferation of video and other bandwidth-intensive applications with a data transmission rate that is about 10-100 times faster than the existing 4G networks. Billed as the technology of the future with faster download speed and low latency, 5G is touted as the primary catalyst for next-generation IoT services. These include connected cars, augmented reality, virtual reality platform, smart cities and connected devices that are likely to revolutionize key industry verticals.

As the 5G ecosystem evolves with increased deployment across the globe, it is likely to offer a plethora of opportunities for diverse industries to spearhead innovation and redefine our daily lives. Riding on such growth drivers, various firms are poised to benefit in 2021. Below is a list of such potential winners in a random order.

Qualcomm Incorporated QCOM: With more than 700 5G design either announced or in the development phase, the company remains well poised to gain from solid 5G traction. Notably, Qualcomm is reportedly the only chipset vendor with 5G system level solutions spanning both sub-6 and millimeter wave bands and one of the largest RF (radio frequency) front end suppliers with design wins across all premium-tier smartphone customers. The company is focused on retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches.

Qualcomm is arguably the largest supplier of mobile phone chips in the world. The company has raised the bar for driverless cars with the launch of the first-of-its-kind automotive platform — Snapdragon Ride — which enables automakers to transform their vehicles into self-driving cars using artificial intelligence. The company has been primarily focusing on developing premium category Snapdragon 8 series chipsets that reportedly delivered speeds of up to 7 gigabits per second with a more powerful X55 5G modem. These chips are mostly found in high-end mobiles and smartphones, which put them beyond the reach of commoners. As such, Qualcomm is seeking to expand its product portfolio and develop mobile phone chips for the masses to drive higher sales and achieve economies of scale through mass production. The company is mulling to add 5G capabilities to its cheaper chipset versions of Snapdragon 6 and 7 series. It is also betting big on the Snapdragon 732G Mobile Platform for immersive gameplay, intuitive interactions and predictive user experiences.

With a VGM Score of A, the stock has long-term earnings growth expectation of 19.6%. The stock has gained 68% in the past year compared with the industry rally of 34.9%. Qualcomm is housed within the Wireless Equipment industry, which carries a Zacks Industry Rank #76, which places it among the top 30% of more than 250 Zacks industries. The stock’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. Qualcomm currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


 
T-Mobile US, Inc. TMUS: Reportedly offering the fastest network in the United States in terms of both download and upload speeds, T-Mobile is the first telecom carrier to activate nationwide 5G network. It arguably has America’s largest 5G network, covering 270 million people in 8,300 cities and towns across 1.4 million square miles. This reflects more geographic coverage than its nearest two rivals put together. T-Mobile’s mid-band (2.5 GHz) 5G network covers more than 30 million people and it expects to increase this tally to 100 million by the end of 2020. Its 5G coverage utilizes longer range low-band 600 MHz spectrum, offsetting the shortcomings of millimeter wave networks like limited range and poor obstacle penetration.

Following its merger with Sprint, T-Mobile boasts an unrivalled bouquet of high- and low-band spectrum for a faster nationwide 5G rollout, undeniably disrupting the competitive landscape of the U.S. telecom market. The company is further strengthening its mid-band coverage by adding more towers and spectrum in places that already have 5G network connectivity, and aims to bring superfast speed to urban areas as well as rural locations. Customers will have access to average 5G speeds up to eight times faster than LTE in a few years and 15 times faster over the next six years. With a VGM Score of B, this Zacks Rank #3 stock has long-term earnings growth expectation of 18.6%. T-Mobile is housed within the Wireless National industry, which carries a Zacks Industry Rank #96, which places it among the top 38% of more than 250 Zacks industries. The stock has gained 72.2% in the past year compared with the industry rally of 1.5%.



Ericsson ERIC: Backed by the relentless pursuit to develop 5G-enabled autonomous vehicles across the globe, Ericsson has secured 118 commercial 5G agreements with unique communication service providers, of which 72 are live networks. The company is increasingly focusing on 5G system development to capitalize on the upcoming market opportunities. The company believes that standardization of 5G is the cornerstone for digitization of industries and broadband. Moreover, Ericsson expects mainstream 4G offerings to give way to 5G technology in the future.

Moreover, as the Trump administration aims to thwart Huawei and ZTE from offering 5G gears across the globe, it has created new business opportunities for the Sweden-based firm. The increased adoption of IoT devices is further expected to give more prominence to technologies like network slicing, thereby benefiting Ericsson. The company has deployed 5G in high-, mid- and low-bands in different urban, suburban and rural locations. Its 5G radio access technologies provide the infrastructure required to meet the growing demand for high-bandwidth connections and support the real-time, high-reliability communication requirements of mission-critical applications. With a VGM Score of A, this Zacks Rank #3 stock has long-term earnings growth expectation of 28.9%. Housed within the Wireless Equipment industry, the stock has gained 29% in the past year.



Verizon Communications Inc. VZ: Verizon is likely to benefit from a disciplined network strategy, including accelerated 5G deployment despite economic uncertainties stemming from the COVID-19 crisis. The wireless operator is building the 5G home solution and mobile edge computing on the same network and expects to witness a solid 5G momentum heading into 2021 backed by customer-centric business model and diligent execution of operational plans. Verizon has completed Dynamic Spectrum Sharing (DSS) trial to accelerate the pace of 5G network evolution. The trial underscores Verizon’s commitment to introduce nationwide 5G coverage with the deployment of Ultra Wideband network services by the end of 2020. DSS will help the company to deploy lower-frequency bands, including mid-band and low-band spectrum, to deliver an optimum combination of 5G coverage and speed to its customers.

Verizon has upped the ante by launching the 5G Ultra Wideband network in multiple cities across the country. The 5G Ultra Wideband network hinges on three fundamental drivers to deliver the full potential of 5G technology. These are massive spectrum holdings, particularly in the millimeter wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy large numbers of small cells. Verizon has systematically invested in 5G technology to gain foothold in the industry. This Zacks Rank #3 stock expects to capitalize on the continued 5G boom and outsmart competitive pressure. With a VGM Score of A, it has long-term earnings growth expectation of 3.5%. Verizon is housed within the Wireless National industry.



AT&T Inc. T: As the first carrier in the industry, AT&T has unveiled its 5G policy framework that hinges on three pillars — mobile 5G, fixed wireless and edge computing. For a seamless transition among Wi-Fi, LTE and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network. Its 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. It believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.

AT&T has expanded its 5G network infrastructure in various markets to serve more than 225 million people. The company is benefiting from lower levels of wireless churn due to access to 5G on its unlimited wireless plans for consumers and businesses and growing adoption of Unlimited Elite wireless plans. The company continues to invest in its wireless and wireline networks to expand coverage and improve connectivity. These initiatives are likely to be reflected in the upcoming results. AT&T expects edge computing solutions to be widely available in autonomous vehicles, drones, robotic production lines and autonomous forklifts. Utilizing machine learning techniques and more connected devices, this could transform the way data-intensive images are transferred across the industry on real time basis. With a VGM Score of B, this Zacks Rank #3 stock has long-term earnings growth expectation of 2.9%. It is housed within the Wireless National industry.

Zacks Top 10 Stocks for 2021

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AT&T Inc. (T): Free Stock Analysis Report
 
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Ericsson (ERIC): Free Stock Analysis Report
 
TMobile US, Inc. (TMUS): Free Stock Analysis Report
 
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