Wall Street strategists are already telling clients what to expect in 2021: Morning Brief
These 3 5G Stocks Are Must-Watch Names, Say Top Analysts
Let’s take a short break from the election drama, and look at 5G. The new wave in networking technology, 5G has sparked an ongoing revolution in the way wireless connections are made. The new network systems offer far higher speeds, much lower latency, and greater data capacity than existing 4G networks, and the implications for high-tech are enormous. Internet of Things, autonomous cars, teledoctor facilities, streaming on demand – all of these segments look to gain from 5G, alongside ordinary cellular and mobile technology.With so many changes in the offing, it’s a cinch that some companies in 5G-related sectors are going to come out on the winning end – and they are likely to be those with direct exposure to 5G, and the ability to capitalize on one or more networking segments: from semiconductor chips, to mobile service, to connection hardware, there are plenty of opportunities in 5G for companies with the requisite skills and products.Turning to the TipRanks database, we’ve pulled up the latest on three stocks that some of Wall Street’s top analysts – stock experts with 4- and 5-star ratings – have tapped for gains in the growing 5G environment. These are companies that meet the profile above, and offer investors the prospect of strong returns.Skyworks Solutions (SWKS)We’ll start in the semiconductor chip industry, where Skyworks is a player with a successful niche. The company is closely tied to Apple (AAPL), drawing as much as 51% of its annual revenues by supplying chips to the device-making giant – and with Apple’s recent release of the 5G-capable iPhone 12, Skyworks sees the potential for steady, and profitable, sales over the next several years as up to 300 million installed iPhone users replace or upgrade their devices.Apple isn’t Skyworks’ only connection to 5G. The chip company is also an important component provider for 5G small cell units, an integral part of the wireless networking infrastructure. 5G operates at shorter range than current network technology, and the move to the new tech will involve heavy build outs of broadcast towers and other hardware.Skyworks’ potential as a provider of semiconductor chips is clear from the share performance. SWKS is up 20% year-to-date, outperforming the S&P’s 9% gain. The share gains come even as revenues slipped in 1H20 – but for investors, earnings were more important. Despite falling sequentially in both Q1 and Q2, Skyworks’ EPS beat expectations in Q2 and followed that with another beat in Q3 and 54% sequential growth to $1.59 per share.Needham analyst Rajvindra Gill writes of Skyworks, “Both broad markets and mobile grew significantly, with broad markets hitting a quarterly record. Clearly the strong Apple 5G builds helped the mobile business but SWKS also saw growth at the major Chinese handset OEMs along with Samsung. We are in the first inning of a multi-year 5G smartphone cycle, in which 5G penetration will double consecutively over the next two years to 1 billion units by 2022. Moreover, SWKS’s strong positioning in IoT, small cell and auto help diversify the revenue streams.”Gill’s comments support his Buy rating on the stock, as does his price target, raised 17% to $200 and implying a 37% one-year upside for the stock. (To watch Gill’s track record, click here)Overall, SWKS shares have a Strong Buy rating from the analyst consensus, based on 15 Buys and 5 Holds. The shares are selling for $145.84, and the $164.39 average price target suggests room for nearly 13% growth. (See SWKS stock analysis on TipRanks)Verizon Communications (VZ)The second stock on our list is Verizon, a name you’ll almost certainly be familiar with. This company is one of the market’s giants, with a market cap near $240 billion, over $130 billion in annual revenues, and a solid position as the US’ second largest wireless service provider. Verizon’s connection to 5G should be obvious – as a mobile provider, the company simply must make use of the new technology, introduce a 5G connection network, or else fold up shop.The company is not folding. Since April last year, Verizon has been building out 5G networks in major urban markets across the US. Verizon has focused its 5G build on the millimeter-wave spectrum, and section of the 5G waveband that maximizes connection speed, but at the cost of range limits and limited indoor usability.Of the stocks on this list, Verizon shows the lowest upside potential, but offers instead a high and reliable dividend payment. In its last declaration, in September for the October payment, the company announced a regular stock quarterly dividend of 62.75 cents per share. This was up 1.25 cents from the previous quarter, and marked the 14th consecutive annual dividend increase for Verizon. The yield on the dividend is 4.3%, well above the average found among Verizon’s S&P 500 peers.Covering this stock for Raymond James is 4-star analyst Frank Louthan, who rates Verizon as Outperform (i.e. Buy). His $64 price target indicates a possible 10% upside for the year ahead. (To watch Louthan’s track record, click here)Supporting his outlook, Louthan writes, “…trends improved over the course of 3Q and are more favorable across the board. We believe the biggest overhang remains on roaming revenue from foregone customer travel during the pandemic… We continue to expect incremental revenue from 5G beginning in 2021 with 5G Home and mobility followed by the mobile edge compute opportunity in 2022…”Overall, Verizon’s Moderate Buy analyst consensus rating is based on 9 reviews, including 3 Buys and 6 Holds. VZ stock has an average price target of $62.63, which suggests an 8% upside from the trading price of $58.07. (See Verizon stock analysis on TipRanks)DZS (DZSI)Last but not least is DZS, a major supplier of networking hardware, especially the cables and fiber optics necessary for the physical connection in high-speed networks. DZS provides broadband solutions and access for more than 1,000 customers – enterprises, operators, and service providers – across 100 countries around the world. In addition to networking cables and devices, DZS also offers manufacturing and engineering service and support.DZS operates worldwide, and is heavily invested in East Asia’s 5G build. The company partnered with Japanese mobile provider Rakuten last year as a technology provider, and is still reaping benefits. Japan’s 5G networks are relatively new, but tap into a market over 100 million strong – and in a country known for tech-savvy.DZS, like most of the market, suffered in 1H20 from the pandemic crisis. But, bouncing back from the pandemic’s recessionary pressures in Q3, DZS saw its best quarterly earnings in over a year. The 20 cents EPS reported beat the forecast by 15 cents, grew 122% sequentially, and was far ahead of the year-ago quarter’s net loss. This stock is another that has outperformed the broader market; DZSI has a net year-to-date gain of 38%.Covering the stock for B. Riley, 5-star analyst Dave Kang wrote, “We believe the company will receive a follow-on order from Rakuten in 4Q, which will be a major catalyst in 1H21. We believe 5G is still in the early stages of a multiyear cycle, and we believe the company is strategically positioned to capitalize on this secular trend.”Kang sets a $15 price target on DZSI, suggesting a 27% upside potential, and rates the stock a Buy. (To watch Kang’s track record, click here)All in all, the 2 recent Buy reviews on DZS give this stock a Moderate Buy rating from the analyst consensus. The shares are selling for $12.22, and their $15 average price target matches Kang’s. (See DZS’s stock analysis at TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.