3 5G shares to buy in July

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5G networks, which can operate up to 100 times faster than 4G networks, are quickly setting the new global standard for cellular speeds. These faster connections support the development of more advanced phones, autonomous robotics, more complex software applications, and devices that deliver more real-time data to AI data processing platforms.

The global 5G services market could further grow at a compound annual growth rate (CAGR) of 46.2% between 2021 and 2028, according to Grand View Research. Investors should take these forecasts with caution, but they should still consider investing in three companies that will benefit from this trend.

Image source: Getty Images.

1. T-Mobile

T Mobile (NASDAQ: TMUS) supplanted AT&T (NYSE: T) as the second largest wireless operator in the United States after its takeover of Sprint a year ago. Its 5G network also offers around 33% more coverage in the United States compared to Verizon (NYSE: VZ) and AT&T combined 5G networks.

T-Mobile is ahead of the 5G race because most of its network runs on low-band spectra, which can go beyond the high-band spectra favored by Verizon and AT&T. However, high band spectra still offer much higher speeds over shorter distances.

T-Mobile also challenged Verizon and AT&T with a “no-carrier” strategy that eliminated long-term contracts, data coverage charges, subsidized phones and other Byzantine nuisances. He then sweetened the pot with free international roaming, data-free streaming, and unlimited text, talk and data plans.

T-Mobile doesn’t pay dividends like Verizon or AT&T, but it’s growing faster. Its revenue soared 60% to $ 36.3 billion last year as it engulfed Sprint, and it expects the merger to generate up to $ 3.1 billion in synergies. this year. Its revenue jumped 75% year-on-year to $ 10.3 billion in the first quarter of 2021 – its last full quarter before the Sprint merger – and analysts expect its revenue increases by 17% for the entire year.

T-Mobile’s adjusted profit will likely decline this year due to the high costs of integrating Sprint’s customer base. But its stock still looks reasonably priced at 44 times earnings over time, and it could continue to outperform Verizon and AT&T as the race for 5G intensifies.

2. American Tower

American Tower (NYSE: AMT) is a REIT (Real Estate Investment Company) that owns and operates more than 214,000 telecommunications infrastructure sites around the world. As a REIT, American Tower must pay more than 90% or more of its profits to shareholders to maintain a favorable tax rate. It is currently paying a term yield of 1.8% and has increased its annual payments for nine consecutive years.

An engineer inspects a wireless tower.

Image source: Getty Images.

American Tower’s diverse tenant base, which includes America’s three largest telecom operators and other leading carriers around the world, also makes it a balanced way to profit from the age-old expansion of the 5G market without worry about the fierce competition between the best telecom operators.

American Tower’s revenue rose 6% to $ 8.04 billion last year, even as the pandemic disrupted some 5G network upgrades, as its consolidated AFFO (adjusted operating funds ) – a key measure of profitability for REITs – rose 8% to $ 3.79 billion. In the first quarter of 2021, its revenue increased 8% to $ 2.16 billion, while its consolidated AFFOs jumped 24% to $ 1.12 billion.

Analysts expect American Tower’s revenue and adjusted earnings to grow 10% and 36%, respectively, this year as the pandemic passes and telecom operators continue to expand their 5G networks. The stock may seem a bit expensive at around 51 times the earnings over time, but its wide divide, well-diversified business, and accelerating growth all justify this premium valuation.

3. Qualcomm

Qualcomm (NASDAQ: QCOM) is one of the world’s largest producers of mobile application processors and baseband modems, and its extensive portfolio of wireless patents entitles it to a portion of every smartphone sold worldwide. These two companies place Qualcomm in a privileged position to benefit from the growth of the 5G market.

Qualcomm still faces stiff competition from Taiwanese rival MediaTek, as well as proprietary chipsets from smartphone manufacturers like Apple, but its Snapdragon (system-on-chip) SoCs should continue to power most premium Android devices for two simple reasons.

First, Qualcomm’s premier Snapdragon 888 SoC consistently delivers more processing power than any of its closest competitors, making it the obvious choice for flagship phones. Second, its Snapdragon SoC combines an application processor, GPU, and baseband modem, making it a cost-effective all-in-one package for cost-conscious OEMs.

Last year, Qualcomm’s revenue rose 12% to $ 21.7 billion while its adjusted profit rose 18%. In the first half of fiscal 2021, its revenue grew 57% year-on-year to $ 16.2 billion, driven by growing demand for new 5G phones, while its adjusted profits jumped 127 %.

Analysts expect Qualcomm’s revenue and profits to grow 49% and 85% respectively this year. These robust growth rates are expected to cool down next year, but the stock still looks cheap at 16 times expected earnings. It also pays a forward dividend yield of 1.9% and has only spent 37% of its free cash flow on this payment in the past 12 months, leaving it plenty of room for future hikes.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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