5G is coming; the future outlines of wireless networking are growing clearer week by week. The new networks promise faster connections over greater bandwidth with lower latency – in short, 5G lets users do more online, and to do it more quickly. The major wireless carriers in the US have already rolled out 5G networks in major urban areas, and, on at least partial bandwidths, across rural areas as well. In China and Korea, 5G networks are even more advanced, and Europe is not far behind.
So, there’s a boom on the way. 5G will change the way we work with wireless, from enabling more advanced IoT and autonomous vehicles to putting faster smartphones in our pockets. And with those changes will come opportunities in the stock markets.
Using TipRanks database, we’ve pinpointed three stocks that, according to Wall Street pros, are poised to gain big as 5G expands. These names cover a range of technologies, all involved in making 5G function – from the radio frequency filters at the front end to the semiconductor chips inside to the mobile hotspots that are going to proliferate wildly.
The first stock on our list, Resonant, is involved at the ‘front end’ of 5G. The wireless signals for the new networks depend on advanced radio frequency (RF) filters, to ensure that devices are only receiving the necessary signals. Resonant’s technology has simplified and streamlined the configuration process in developing advanced RF filters. Industry-wide, the development of RF filters for 5G wavebands represents a potential bottleneck in the rollout; a company that can open up that pathway will have a clear path toward profitability.
Resonant stands at that edge. In the last two years, the company has developed filters capable of enabling 10 to 20% bandwidth, far higher than the 3 to 4% considered standard on most filters. A higher capacity RF filter will be necessary for the higher speeds of 5G networks.
While Resonant, like many cutting-edge tech companies, shows a regular quarterly net loss, that loss has been narrowing during the past two quarters – despite the coronavirus crisis.
Covering this stock for H.C. Wainwright, analyst Kevin Dede writes, “Resonant is positioned better, we think, in the 5G world than it has been at any time prior […] Remaining a pure technology player, Resonant licenses its design technology to customers, some of which are fabrication facilities. In an expanding 5G scenario coupled with next-generation, higher 5-6GHz frequency WiFi, Resonant appears well positioned, underpinning the disruptive aspect of Resonant’s technology, the main tenet of our investment thesis.”
“Ultimately, we value Resonant on an extended cash flow model that assumes a solid customer base and the placement of 5G-capable systems in support of broad based 5G handset sales,” the analyst concluded.
To this end, Dede rates RESN a Buy along with a $4 price target, which implies an upside potential of 48% from current levels. (To watch Dede’s track record, click here)
Resonant has a Strong Buy rating from the analyst consensus, based on a unanimous run of 3 Buys. Shares are selling for $2.71 and the $3.50 average price target suggests room for 29% upside growth this year. (See RESN stock analysis at TipRanks)
Inphi Corporation (IPHI)
Next up on our list, Inphi, is a mid-cap player in the semiconductor chip industry. The company produces components for high speed analog and mixed signal chips, in the 10G to 800g range. Inphi’s components are found in processors, GPUs, and network interface cards – all chip systems essential to receiving and using 5G network signals. Inphi boasts that it speeds up data interconnectivity, allowing the quick transfer of big data streams reliably and with high quality.
Getting data moving fast is a major selling point in today’s networking markets, and Inphi has profited handsomely from recent successes. The company’s earnings have been growing steadily for the past four quarters, shrugging off the COVID-19 pandemic and delivering record EPS and revenue in Q2. Top-line revenue for the quarter was $175.3 million.
A major driver of Inphi’s 1H20 numbers has been the company’s Telecom segment, directly tied to 5G solutions. Inphi’s PAM4 Optical PHYs have been delivering both strong performance in data transmission and strong sales. The company’s telecom sales were up 119% year-over-year in the second quarter.
Richard Shannon, a 5-star analyst with Craig-Hallum, sees a clear path forward for Inphi over the medium term: “IPHI continues to execute well and benefit from strong demand in both 5G and cloud interconnect. IPHI’s 2Q had outsized benefit from 5G ASICs that may temper somewhat in 3Q, but we still see 5G/telecom as an important driver for many quarters to come. IPHI continues to retain outsized share in PAM4, and we anticipate continued—if not accelerating—growth in 2H20 and 1H21 from new customer ramps…”
Shannon’s $156 price target suggests a 36% one-year growth potential for the stock, in line with his comments and fully supporting his Buy rating. (To watch Shannon’s track record, click here)
Overall, IPHI’s Strong Buy analyst consensus rating is based on 14 reviews, including 12 Buys and just 2 Holds. The stock is currently selling for $114.04 and has a $146.21 average price target, indicating a 28% upside potential over the next 12 months. (See Inphi stock analysis on TipRanks)
Inseego Corporation (INSG)
Last on our list is mobile hotspot maker Inseego. The company specializes in wireless and mobile hotspot technology, and is taking a leading role in developing and marketing 5G capable routers and hotspots, bringing the new networks directly into private homes.
The company already works with Verizon to make 5G routers available to the network’s customers. A new line-up of products will expand in-home 5G and also connect with IoT systems. Inseego is partnering with chipmaker Qualcomm on 5G modem chips for advanced routers.
Craig-Hallum’s Jaeson Schmidt, rated 4-stars by TipRanks, sees Inseego doing well with 5G over the next 6 to 12 months. He writes, “The 5G ramp remains on track with … 8 products (5 hotspots, 3 fixed wireless) across 6 carriers … to launch in 2H20. The Company indicated it continues to expand the pipeline of operators with each in various stages of activity. While the ramp in the MiFi business has (rightfully) been the focus in 1H20, we do not think investors should forget about the significant opportunity in 5G which was always set to be a 2H20 story…”
Accordingly, Schmidt rates INSG a Buy and back it with a $17 price target. This figure suggests a robust 44% upside for the coming year. (To watch Schmidt’s track record, click here)
With 3 Buys and 2 Holds set in recent weeks, INSG shares have a Moderate Buy rating from the analyst consensus. The stock is priced at $11.85, and the average price target, at $13.10, implies a 10.5% upside. (See Inseego stock analysis on TipRanks)
To find good ideas for 5G stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.