By now, the coronavirus isn’t news. We all know what’s going on, even if we’re not quarantined or languishing in lockdown. COVID-19, spreading in a global pandemic, has struck markets with a hammer blow, and the main indexes remain down at least 29% from their February highs.
Investors are confused. We’ve seen bouts of panic selling, along with sporadic purchase activity by insiders, and there has been no consistency in stocks’ reactions to the news cycle.
Still, there are some sectors that are likely to keep bring returns for investors long-term. Among the chief of these are tech stocks, especially those connected to the ongoing – and accelerating – 5G rollout. This is the cutting edge of wireless digital tech, the thin end of the wedge for mobile technology, and even in today’s bear market conditions, the tech stocks involved in 5G are likely to see profits. And that means returns for investors.
We’ve used the TipRanks database to pull up three such stocks; all are Buy-rated, and boast 40% or higher upside potential. Let’s take a closer look.
Marvell Technology Group (MRVL)
We’ll start with one of the smaller semiconductor chip makers. Marvell is a Silicon Valley company, with a $13.9 billion market cap and fiscal 2019 profits of $179 million on $2.86 billion in revenues. The company has facilities in 14 countries.
In the past year, Marvell flexed its muscle in two important corporate acquisition; the chipmaker acquired to rivals, Avera and Aquantia, in cash deals that cleared away competition and gave the company a smoother path forward. Marvell has also partnered with both Korean tech giant Samsung and Finnish handset maker Nokia on 5G processor chips, in moves described as ‘major wins’ for Marvell.
In the Nokia arrangement, the Finnish handset maker said that it engaged with Marvell “to solve its 5G chip problems,” a clear endorsement of Marvell’s industry reputation. And Samsung is one of the world’s largest smartphone manufacturers – securing a position to supply the company’s 5G compatible chips, in advance of the device rollout cycle, puts Marvell in a strong competitive position against its peers.
In Q4 2019, Marvell reported revenue and EPS both below the year-ago figures – but beat the quarterly forecasts. Revenue, at $717.7 million, was almost 1% better than expected, while EPS, at 17 cents, was a full 6.25% above the estimates. Beating the estimates was a welcome change from Q3’s miss, and the success was attributed to the partnerships with OEMs Samsung and Nokia. Securing the supplier relationships with two major OEMs puts Marvell in a solid position to gain as new 5G handsets and devices hit the market.
Marvell has received warm reviews from two 5-star analysts in recent weeks. Writing or Rosenblatt Securities, Hans Mosesmann gives the stock a Buy rating with a price target of $32, which implies an upside of 68%. (To watch Mosesmann’s track record, click here)
Backing his stance, Mosesmann says, “Impressive execution even with the expected COVID-19 headwind (5% hit to the 1Q guide), as the company continues to accelerate 5G content and share within Samsung and a highly multi-year 5G engagement with Nokia. We see no other silicon player that has the broad processor/baseband/networking portfolio, IP, customization, and S/W compatibility capabilities that Marvell has…”
Also bullish is Oppenheimer’s Rick Schafer. Schafer’s $30 price target suggests room for 55% upside growth in support of a Buy rating.
In his comment on the stock, Schafer writes, “Acquisitions of Aquantia and Avera further bolster MRVL’s position in automotive and networking. MRVL’s emerging growth story, led by 5G infrastructure builds takes root this year. Beyond 5G, we see the next leg of greenfield growth led by automotive connectivity.” (To watch Schafer’s track record, click here)
Overall, Marvell gets a Moderate Buy rating from the analyst consensus, based on a total of 15 reviews. These reviews include 12 Buys and 2 Hold, along with a single Sell. Shares are priced low for a high-end tech company, at $19.34, and the $29.14 average price target indicates a 50% upside potential. (See Marvell’s stock analysis at TipRanks)
Skyworks Solutions (SWKS)
Our next company, Skyworks, has suffered recently as its fortunes are closely tied to Apple’s. This mid-cap semiconductor company is a major supplier for Apple’s iPhone line, and has seen its own fortunes decline since the giant admitted that Q2 earnings will not meet expectations in the wake of the coronavirus epidemic. The extent of Skyworks’ dependence on Apple is clear from a single statistic: in fiscal 2019, the chip company made 51% of its total revenue from sales to Apple.
While partly a weakness, this link to Apple also gives Skyworks a clear entry into the 5G chip market. The company’s products will power the new 5G iPhones – and makes Skyworks the supplier for an end-user base over 900 million strong, and loyal to their iPhones. It’s a solid foundation for Skyworks.
Still, the share price is down. But – that fall in share price may be an opportunity to buy cheap now. Skyworks has lowered guidance of fiscal Q2 revenue and earnings, in a move that parallel’s Apples. The chip maker, however, has an advantage over Apple, in that it’s major manufacturing facilities are located in the US, and so are immune to both coronavirus trade disruptions and US-China tariff issues. This puts Skyworks on firm foundation to ramp up production when market conditions return to normal.
That ‘return to normal’ is seen as likely in 2H20, as 5G is coming, and will not be long delayed. Apple will be introducing 5G compatible iPhones, and Skyworks is positioned as the prime supplier of chips for the devices.
Michael Walkley, 5-star analyst with Canaccord Genuity, sees a clear path forward for Skyworks. He writes, in a comment published earlier this month, “We anticipate a strong recovery in Mobile Products starting in 2H/C20 with the 5G rollout on track driving increased dollar content along with the seasonal ramp for Apple’s anticipated 5G lineup…”
Walkley’s $125 price target implies an upside of 57% for the coming 12 months, and support his Buy rating on this stock. (To watch Walkley’s track record, click here)
Skyworks’ Moderate Buy consensus rating is based on no fewer than 16 Buy-side reviews, which overbalance the 6 Holds the stock has also received. SWKS sells for $83, and the $128.79 average price target suggests that the stock has room for 55% growth going forward. (See Skyworks stock analysis on TipRanks)
Inseego Corporation (INSG)
We end this list with Inseego, a specialist in industrial internet mobile connection systems. The company provides the advanced modems and routers that IoT demands, especially for building device-to-cloud connections. The Internet of Things is a niche that is bound to expand as the improved latency of 5G networks comes on-line.
Along those lines, Inseego did state in the recent Q4 report that it has 5G trials in progress with 20 mobile operators around the world. The comment was distressingly non-specific; however, management did reveal that INSG realized $11 million in revenue from 5G initiatives during the quarter, in North America, Europe, the Middle East, and the Asia-Pacific regions.
In other Q4 results, INSG saw a deeper loss than expected, at 10 cents per share. Revenues came in at $52.33 million, in line with estimates but down 6.6% year-over-year. On a positive note, the company’s balance sheet improved, as it reduced debt by some $60 million. Also positive was a capital infusion from Mubadala, worth $25 million. The new capital helps support INSG as it moves forward on its 5G plans.
Canaccord analyst Walkley, quoted above, reviewed Inseego, as well, and said of the company’s forward path, “We believe Inseego will deliver very strong 2H/2020 and C2021 growth as global carriers launch 5G networks and ramp volumes of Inseego’s growing product portfolio of X55 powered 5G products. As evidenced by the company’s 20 active 5G trials, Inseego’s growing sales team continues to build an impressive pipeline of new opportunities.”
Walkley puts a $7.50 price target on this stock, implying an impressive 32% upside from current price levels. He adds a Buy rating, believing that now is the time to buy into Inseego. (To watch Walkley’s track record, click here)
Inseego has a unanimous analyst consensus rating, a Strong Buy based on 6 Buy-side reviews set in recent weeks. Shares are priced at $5.69, and have an average price target of $8.60. This suggests that the stock has room for 52% growth in the next 12 months. (See Inseego stock analysis at TipRanks)