6 Companies With Big 5G Profit Potential
We’re heading into the final quarter of the year. And I’m standing here looking around for everything that was promised to come from 5G.
OK, it’s not quite that literal. I admit, I haven’t upgraded to a 5G-compatible phone yet. And if I had, I would at least see that little icon flashing at the top of my screen part of the time.
Where are the self-driving cars, smart cities and robots!?
The robots are still relegated to manufacturing cages, and the cars and cities are being created.
I just have no patience.
But then I take a moment and think back to before 4G changed the world. When I try to think about 4G’s predecessor, I come up blank.
I remember having to press the numbers three times to get the proper letter when texting, but I don’t remember anything exciting about the phone in between that and my 4G device.
I guess it just wasn’t that exciting.
We could check emails and play songs that we took the time to download onto our phone. But all that was nothing compared to what we can do now.
I can summon a meal or a car with a few clicks. I can summon up almost any piece of media without having to stay put and download it to my phone first. These things came to fruition because 4G was 50 times faster than 3G.
• And 5G is going to been even faster. Maybe even 600 times faster than what currently exists.
We need that speed.
Everything is connected to the internet. The number of Internet of Things (IoT) devices is increasing faster than 4G can handle. The current 21.5 billion connected devices are expected to turn into 30.9 billion by 2025.
• We are on the cusp of the biggest tech rollout in history.
The technology will impact every sector of the market and every facet of everyday life.
So, I return to my original question … where is it?
The big three wireless carriers are working on it. Over 25,000 new 5G towers have been installed so far. Telecom operators worldwide have been actively installing macro base stations to provide all the network improvements that we’ve seen over the past two years.
But is it paying off?
Let’s look at three telecom giants and three smaller (for now) that are betting big to win big from the 5G megatrend … and what the Weiss Ratings can tell us about them all.
Telecom Giant No. 1:
Verizon Communications (NYSE: VZ)
The company’s been sliding down the Weiss Ratings since last October when it sat pretty with an “A-” grade.
But then net income declined, followed by earnings before interest and taxes (EBIT). Just last week, it got downgraded again, moving from a “C+” to a solid “C.”
To Verizon’s credit, it currently pays a 4.6% dividend. Not only did it continue to pay its investors through the pandemic, but it was also right on time with its annual dividend increases. This includes the latest dividend hike, which will be seen in shareholders’ Oct. 31 payment.
Shares are currently down 4.6% so far this year and 4.3% over the past 12 months.
Telecom Giant No. 2:
AT&T (NYSE: T)
This one is currently sitting at a “C-.” Its most recent downgrade came earlier in the year due to a decline in earnings per share, net income and EBIT.
AT&T hasn’t seen a “Buy” rating since the end of 2019. That was back before the pandemic and all the uncertainty that came with it.
To its credit, the company managed to maintain its 52-cents-per-share quarterly dividend throughout the pandemic. But all it did was maintain.
In other words, investors did not see their usual February increase they had become accustomed to.
Shares are down 2.7% so far this year but show a slight gain of 1.6% over the past twelve months.
Telecom Giant No. 3:
T-Mobile US (Nasdaq: TMUS)
Since 2015, T-Mobile’s stock mostly bounced around in the “B” range and it currently sits at a “B-.”
Its latest change was a downgrade due to a noticeable decline in the total return index. Essentially, our Weiss Ratings modeling doesn’t think the total return is going to be as high as it formerly did.
T-Mobile doesn’t pay a dividend, but over the past few years, we’ve seen the company rapidly expand through acquisitions. Shares are down 4.2% so far this year, but up 11% over the past 12 months.
What’s notable about T-Mobile is that these guys have been throwing money at this tech. New antennas, new spectrum bands … you name it. But there’s plenty more to be done.
A big component of the technology is “small cell boxes.” These are hung on streetlamps, telephone poles and even rooftops. They have an easier deployment and cheaper installation costs compared to macro base stations. And they help boost 5G in an area of weak coverage within a macro cell network.
These small cells operate in both the licensed and unlicensed spectrum. They can have a range of 10 meters to a few kilometers. They vary in size and style so they can be attached to something that already exists.
IDTechEx forecasts there will be around 45 million 5G small cells deployed by the end of 2031. This statistic brings dollar signs to my eyes … and hopefully to my investments.
Let’s look at a few companies that look like they’re set to profit.
Small Cell Player No. 1: Ericsson (Nasdaq: ERIC)
Speaking of a world before 5G … you might remember having an Ericsson phone “back in the day.”
The company shut down its phone business years ago and is now one of the world’s largest makers of 5G equipment. That includes small cells.
Ericsson shows multiple outdoor small cell solutions that are fully contained and can easily attach to existing infrastructure. Anything from bus stops, information kiosks, billboards and lamp posts. Even inside a manhole cover!
|Source: Ericsson website|
These vault solutions effectively address cities needs by enabling the reuse of existing assets and underground space. That means a lower cost of ownership for customers.
The company currently has a “B-” rating and pays a 1.9% dividend. Shares are down 5.9% so far year to date, but up 6.7% over the last 12 months.
Small Cell Play No. 2: Nokia (NYSE: NOK)
Yet another blast from the past. I don’t remember all the phones in between, but my first one was in fact a Nokia.
Just like Ericsson, Nokia has given up making phones and instead focuses on 4G and 5G equipment. The company’s working on the 4G deployment on the moon that’s expected sometime in late 2022.
Nokia claims to offer the industry’s most extensive small cells portfolio. It wants to enable seamless 5G connectivity between indoor and outdoor locations.
The company was recently upgraded to a “D+” as its net income and total capital increased. Shares are up 40% year to date and 42% over the past 12 months.
Small Cell Play No. 3: RF Industries (Nasdaq: RFIL)
This is a name that you might’ve not heard of. This San Diego-based firm is tiny in comparison to Nokia and Ericsson.
RF Industries makes coaxial and fiber optic cable assemblies, harnesses and components. It also has a product portfolio of distributed antenna systems and small cells, which will be important as 5G coverage expands.
The Weiss Ratings upgraded this company to a “C+” in August.
This isn’t the first time it’s climbed back to this rating. But I do think this just might be the time we see it break into the “Buy” range. I’m definitely adding this one to my watchlist.
Shares are up 65% year to date and 82% over the past year.
These are just six of the many companies that will be impacted by the continued 5G growth. And even though it seems to be progressing a little slower than we expected, all these companies have laid a solid foundation for potential profits.
And I know I’ll be using the Weiss Ratings to help find even more potential future winners.