Let’s talk about the network that connects you to the world. That network is changing, as the new 5G technology rolls out around the world. China is leading the way, with the Europe and the US working to catch up. Successfully switching the major wireless networks to 5G will bring a host of advantages: higher connection speeds, lower latency, clearer signals, and far better data carrying capacity.
Carrying capacity is likely the key to success for 5G. The new networks will permit larger and faster data transfers, allowing technologies from the Internet of Things to autonomous vehicles to mature. It will be a world-changing event, and it is taking shape right before our eyes.
As 5G networks expand, and more customers, both business and personal, switch over, the companies that supply the gear will stand to boom. 5G will require everything from new silicon semiconductor chips to signal testing equipment to smartphone handsets. Radio frequency finding technology is involved, as well as more venerable tech, such as connecting cables.
With this in mind, using the TipRanks platform, we’ve located two stocks that stand to gain from the 5G revolution that is building up. They hold different niches in the wireless tech sector, one in chips and the other in microwave networks.
Qorvo, Inc. (QRVO)
We’ll start with Qorvo, a large-cap semiconductor chip company based in Greensboro, North Carolina. Qorvo saw $3.24 billion in total revenues for the calendar year 2020, making it a mid-sized competitor in the chip industry. The company’s main product focus is chipsets for use in radio frequency transmitters – a key component of broadband and wifi networks.
Qorvo has been neck-deep in 5G for several years now, producing RF systems capable of operating at 5G’s frequencies – and making the new wireless a reality. The company has been developing sub-6 GHz and cmWave/mmWave wireless infrastructure products that are needed to roll out the systems. Qorvo’s product line also includes a full portfolio of RF devices, such as phase shifters, switchers, and integrated modules, that are necessary for supporting networks – and that work with 5G.
In the most recent quarterly release, for Q4 of fiscal 2021, Qorvo edged over the expectations and showed total revenue of $1.73 billion. This marked the third consecutive quarter of revenues exceeding $1 billion. The top line was up 36% year-over-year. The revenue print was driven by the company’s Mobile Products segment, which brought in $808 million of the revenue total, an increase of 45% yoy.
All of this caught the attention of Needham's Rajvindra Gill, who titled his latest report on this stock, ‘5G Momentum Continues.’ The 5-star analyst wrote: “Mobile Products continues to be driven by 5G handset content increases and expected higher volumes in CY21. Infrastructure & Defense is expected to see a better 2H21 after a slower 1H start, with more MIMO deployments in the US expected. Utilization is expected to rise over the year, which will help sustain margins.”
To this end, Gill rates QRVO shares a Buy, and his $245 price target implies a one-year upside of 33%. (To watch Gill’s track record, click here)
Overall, this stock has a Strong Buy rating from the analyst consensus, based on 12 reviews with a breakdown of 10 to 2 in Buy versus Hold. The shares are priced at $184.27 and the average price target of $218.83 suggests ~19% upside in the next 12 months. (See QRVO stock analysis on TipRanks)
Aviat Networks (AVNW)
Next up, Aviat, is a provider of microwave networking solutions. The company’s products include hardware – such as microwave routers and switches, trunking units, and indoor and outdoor radios – as well as software network management, stabilization, and automation. Aviat’s customer base include both public and private entities: the State of Oregon, the City of San Jose, Verizon, and US Cellular, to name just a few.
Aviat is deeply involved in the development and rollout of 5G networks. The company’s networking solutions are integral to public expansion of rural broadband, a market that is benefitting from heavy governmental funding.
The company is not just expanding 5G in the US. Aviat in April announced an agreement with Africell, a mobile provider with over 12 million subscribers across Africa, for provision of a ‘5G-ready end-to-end disaggregated transmission network’ that will cross international borders on the continent.
In early May, the company reported its fiscal Q3 earnings, with both EPS and revenue beating the consensus estimates. EPS, at 49 cents, was 22 cents better than expected, a beat of 81%, while the $66.4 million in revenue was 5% better than expected.
AVNW shares have been gaining steam in the 12 months, rising ~418%. Yet, Northland analyst Tim Savageaux believes there’s still some fuel left in the tank. The 5-star analyst rates AVNW an as Outperform (i.e. Buy) and his $45 price target implies room for a 16% upside from current levels. (To watch Savageaux’s track record, click here)
“We believe these customers [5G and rural broadband] could contribute ~$100M over 5 years with initial orders already in hand, with other 5G driven opptys in the US and globally potentially adding to that,” Savageaux opined.
Looking at the rest of this year, Savageaux added, “The company noted positive book to bill and backlog remaining above $200M, leading us to increase our FY21 revenue to ~$270M implying … 13% revenue growth for the year.”
Some stocks fly under the radar, and AVNW is one of those. Savageaux’s is the only review on record for this small-cap network provider. (See AVNW stock analysis at TipRanks)
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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.