The demand for 5G connectivity is expected to grow because high data speeds and low latency are essential for utilizing advanced technologies in the digital age. Thus, AI-powered services and IoT have created a lucrative growth opportunity for the 5G industry. In addition, the demand for 5G services is expected to be high in the field of VR, AR, and Ultra-High-Definition videos.
The global 5G services market is expected to reach $3827.64 billion by 2032, growing at a 55% CAGR.
Given this backdrop, we think it would be prudent to bet on fundamentally sound 5G stocks Broadcom Inc. (AVGO), Crown Castle International Corp. (CCI), Nokia Oyj (NOK), and Ciena Corporation (CIEN). Though these stocks have fallen more than 10% in price year-to-date, they are well-positioned to rebound in the coming months.
Click here to checkout our 5G Industry Report for 2022
Broadcom Inc.(AVGO)
San Jose, Calif.-based AVGO designs, develops, and offers various semiconductor devices. It focuses on delivering complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V based products worldwide. The company provides set-top box system-on-chips (SoCs), cable, digital subscriber line, and passive optical networking. It operates in two segments: Semiconductor Solutions; and Infrastructure Software.
Last month, AVGO announced that its broad, industry-leading PCIe Gen 5.0 portfolio is setting the base for the ecosystem to develop high-performance, next-generation servers. AVGO's PCle Gen 5.0 SerDes, switches, and custom silicon products are now available to OEMs, ODMs, and cloud providers, which are being tested and demonstrated for large-scale interoperability. AVGO's PCle Gen 5.0 SerDes should enable its ability to seamlessly unify the data center where high-speed computing, low latency, and data processing are critical.
Also last month, AVGO announced the availability of the industry's most reliable and highest density Gen 7 64G Fibre Channel switch platform, the Brocade G730 Switch. It is a 128-port core switching platform for the autonomous SAN. In addition, the company announced the industry's first double density 64G Fibre Channel optical transceiver that widens the port density for the Brocade G730 and G720 switches.
In its fourth fiscal quarter, ended Oct. 31, 2021, AVGO’s net sales increased 14.5% year-over-year to $7.41 billion. Its non-GAAP net income increased 22.2% from its year-ago value to $3.50 billion, while its non-GAAP adjusted EBITDA grew 18.8% year-over-year to $4.55 billion. The company's non-GAAP EPS rose 23% from the prior-year quarter to $7.81.
The consensus EPS estimate for the first quarter ended Jan. 31, 2022, represents 23% year-over-year growth to $8.13. Analysts expect its revenue to increase 14.3% year-over-year to $7.61 billion for its first fiscal quarter, ending Jan. 31, 2022. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 11.7% in price year to date. However, it has gained 21.7% over the past nine months.
AVGO's POWR Ratings reflect this promising outlook. The company has an overall b rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AVGO is also rated a B for Growth, Sentiment, and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #11 of 97 stocks.
To see additional POWR Ratings for Value, Stability, and Momentum for AVGO, click here.
Note that AVGO is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Crown Castle International Corp. (CCI)
CCI in Houston, Tex., is a provider of shared communication infrastructure that connects cities and communities to essential data, technology, and wireless services, bringing important information to the business and people that require them. It operates, owns, and leases more than 40,000 cell towers and approximately 80,000 route miles of fiber supporting small cells and fiber solutions.
In January, CCI signed a new 12-year agreement with T- Mobile US, Inc. to assist the continued build-out of T-Mobile's nationwide 5G network with increased access to CCI's towers and small cell locations. The agreement should allow the UN carrier to augment further and deepen the reach of its industry-leading 5G network to help consumers across the United States and realize financial synergies following its merger. Under the agreement, CCI should be able to generate long-term tower and small cell revenue growth.
CCI's net revenue increased 10.8% year-over-year to $1.65 billion in the fourth quarter, ended Dec. 31, 2021. Its operating income amounted to $522 million, while its net income came in at $353 million. And its adjusted EBITDA stood at $984 million over the period.
Analysts expect CCI's revenue to increase 13.6% year-over-year to $1.69 billion in the first quarter (ending March 31, 2022). The company's EPS is expected to grow 57.5% year-over-year to $1.89 in the first quarter. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
CCI stock has declined 19.5% in price year-to-date. However, over the past year, it has gained 9.3%.
CCI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth and a B for Momentum, Stability, and Sentiment. In the REITs – Diversified industry, it is ranked #7 of 50 stocks.
In total, we rate CCI on eight different levels. Beyond what we've stated above, we have also given CCI grades for Value and Quality. Get all the CCI ratings here.
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK is the global mobile and fixed network solutions provider. Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies are the company’s four operational segments. It focuses on mobile radio for communications service providers and enterprises and provides network planning and optimization, network implementation, systems integration, and other networking solutions.
This month, NOK announced that its innovative Liquid Cooling AirScale portfolio is now commercially available. NOK developed this first-of-its-kind solution so that radio networks become more sustainable and cost-effective by bringing down the energy required to cool a base station. Furthermore, base station CO2 emissions can be reduced by up to 80% and the cooling system energy consumption by up to 90% versus traditional active air-cooling systems.
Also this month, NOK launched Adaptive Cloud Networking so that a service provider cloud network can be transformed to be more consumable, agile, and automated. This comprehensive solution has been designed in response to the unforeseeable demands of the 5G era by supercharging a service provider's data center fabric and smoothly extending its operations to the edge clouds. This innovation should enable service providers to strengthen their crucial role in the 5G digital network value chain.
During its fourth quarter, which ended Dec. 31, 2021, NOK's net sales amounted to €6.41 billion ($7.16 billion). Its operating income grew 67.8% year-over-year to €740 million ($826.27 billion), while its net income came in at €680 million ($759.27 million) compared to a €2.70 billion ($3.01 billion) net loss in the fourth quarter of 2020. The company's EPS came in at €0.12 compared to a €0.48 loss per share in the prior quarter period.
NOK is expected to witness $6.45 billion revenue growth, representing year-over-year growth of 2.2% in the third quarter, ending Sept. 30, 2022. The $0.11 consensus EPS estimate for the third quarter indicates a 15.1% improvement year-over-year. In addition, the company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 16.7% in price year to date. However, over the past year, it has gained 29.5%.
It is no surprise that NOK has an overall B rating, which equates to Buy in our POWR Ratings system. NOK has an A grade for Value and a B for Sentiment. Among the 55 stocks in the Technology - Communication/Networking Industry, it is ranked #10.
Click here to see the additional POWR Ratings for NOK (Growth, Stability, and Quality).
Note that NOK is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
Ciena Corporation (CIEN)
CIEN offers network hardware, software, and services that globally assist transporting, routing, switching, aggregation, service delivery, and managing video, data, and voice traffic on communications networks. The Hanover, Md., company’s Networking Platforms segment provides optimized hardware networking products and solutions for the convergence of coherent optical transport, optical transport network switching, and packet switching.
Last month, NO-UK, a submarine cable system between Norway and the United Kingdom, accomplished a record-breaking 800Gb/s line rate using CIEN's GeoMesh Extreme, powered by WaveLogic 5 Extreme coherent optical technology. This enabled NO-UK to deliver its customers greater capacity, faster speeds, and a greener offering through lower energy consumption.
For the fourth quarter, ending Oct. 30, 2021, CIEN's total revenue increased 25.7% year-over-year to $1.04 billion. Its gross profit grew 18% from its year-ago value to $477.11 million, while its operating income improved 47% year over year to $137.41 million. Its non-GAAP net income increased 40.4% year-over-year to $132.70 million. And its non-GAAP EPS rose 41.7% from the prior quarter to $0.85.
Analysts expect CIEN's revenue to increase 11.6% year-over-year to $845.14 million in the first quarter, ending Jan. 31, 2022. The EPS is expected to increase 5% year-over-year to $0.65 in the second quarter, ending April 30, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has tumbled 12.6% in price year-to-date. However, it has gained 25.8% over the past nine months and 12.2% over the past three months.
CIEN's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Quality. Within the Technology - Communication/Networking Industry, it is ranked #11 of 55 stocks.
Beyond what we've stated above, we have also given CIEN's grades for Growth, Value, Sentiment, Stability, and Momentum. Get all the CIEN ratings here.
Click here to checkout our 5G Industry Report for 2022
AVGO shares were trading at $588.34 per share on Wednesday morning, up $18.22 (+3.20%). Year-to-date, AVGO has declined -11.58%, versus a -7.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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