One of the major investment trends in recent years has been the development of 5G technology. Since the introduction of 5G, global telecommunications have developed dramatically. Moreover, since the world has become more hooked on data, 5G infrastructure makes information transfer across networks faster and more efficient, while government initiatives are also assisting the industry’s growth.
Let’s dive deeper into the fundamentals of top 5G stocks Broadcom Inc. (AVGO), Verizon Communications Inc. (VZ), and Nokia Oyj (NOK) to see if they are worth considering in April or not.
5G industry participants are flourishing globally due to its speedy rollout and strong growth catalysts, including the increasing need for fast internet, the continuous improvements in 5G technology, and the surge of remote work. According to an Ericsson Consumer Lab study, at least 510 million consumers across 37 markets will likely upgrade to 5G in 2023 despite rising inflation and increasing living costs.
Moreover, new data from GSMA Intelligence reveal that consumer connections surpassed one billion by the end of last year and are expected to double by 2025, thanks to new network deployments and enterprise momentum. As of January 2023, 229 commercial 5G networks globally and over 700 5G smartphone models were available to users.
The U.S. General Services Administration (GSA) has released plain-language instructions to assist federal organizations in purchasing fifth-generation (5G) wireless technology. Federal Acquisition Service Commissioner Sonny Hashmi said, “5G networks have the potential to be faster, more reliable, and serve many more devices — and could provide infrastructure to help with everything from smart buildings to telemedicine.”
Driven by the demand for dependable and low-latency communication networks, Internet of Things (IoT) devices, and high-speed internet connections, the global 5G infrastructure market is projected to reach $42.84 billion by 2030, growing at a CAGR of 54.4%.
In addition, owing to the surging adoption of 5G network connectivity by mobile operators for commercial and residential applications, the 5G Network and Tower Deployment market is expected to reach $ 17.79 billion by 2028, growing at a CAGR of 11.6%.
With these factors in mind, investors might consider buying fundamentally sound 5G stocks AVGO, VZ, and NOK that look well-positioned to capitalize on the industry’s tailwinds.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices focusing on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.
On March 6, AVGO introduced the industry’s first 5nm 100G/lane optical PAM-4 DSP PHY with integrated transimpedance amplifier (TIA) and laser driver, the BCM85812, optimized for 800G DR8, 2x400G FR4, and 800G AOC module applications. Monolithic fully integrated 800G PAM-4 PHY delivers top-notch performance and efficiency for pluggable transceiver modules.
“This first-to-market highly integrated 5nm 100G/lane DSP PHY extends Broadcom’s optical PHY leadership and demonstrates our commitment to addressing the stringent low power requirements from hyperscale data center and cloud providers,” said Vijay Janapaty, vice president and general manager of the Physical Layer Products Division at AVGO.
On March 2, AVGO declared a quarterly dividend of $4.60 per share, payable on March 31, 2023. The company’s four-year average dividend yield is 3.22%, and its current dividend of $18.40 translates to a 2.90% yield on prevailing prices. Its dividend payouts have grown at a 13.8% CAGR over the past three years and a 25.7% CAGR over the past five years. Also, it has a record of 11 years of consecutive dividend growth.
In terms of trailing-12-month AVGO’s gross profit margin of 74.70% is 48.4% higher than the 50.35% industry average. Likewise, its trailing-12-month levered FCF margin of 39.23% is 548.9% higher than the industry average of 6.05%.
AVGO’s non-GAAP net revenue increased 15.7% year-over-year to $8.92 billion in the fiscal first quarter that ended January 29, 2023. Its adjusted EBITDA increased 17.8% year-over-year to $5.68 billion for the same quarter. Its non-GAAP net income came in at $4.48 billion, up 19.8% year-over-year, while its adjusted EPS grew 23.1% from the year-ago value to $10.33.
Street expects AVGO’s revenue to increase 7.3% year-over-year to $8.70 billion for the fiscal second quarter (ending April 30, 2023). Its EPS is expected to increase 11.6% year-over-year to $10.12 in the same quarter. It surpassed the revenue and EPS estimates in each of the trailing four quarters, which is promising.
The stock has gained 42.7% over the past six months to close the last trading session at $633.75.
AVGO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Among the 91 stocks in the B-rated Semiconductor & Wireless Chip industry, it is ranked #6. AVGO is also rated an A in Quality and a B in Sentiment. To see additional POWR Ratings for Growth, Value, Momentum, and Stability for AVGO, click here.
Verizon Communications Inc. (VZ)
VZ and its subsidiaries offer communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governmental entities. Its segments are Consumer and Business. It operates through two segments: Verizon Consumer Group; and Verizon Business Group.
Recently, the company announced the expansion of its all-fiber, high-speed broadband services to rural households in Bedford County, Virginia. The 12-month project would bring high-speed broadband connectivity to approximately 349 addresses by spring 2024.
On March 16, VZ introduced new wireless home and business internet choices that utilize 5G Ultra-Wideband to residents and businesses in Newark and Trenton, New Jersey, Syracuse, New York, and Wilkes-Barre, Pennsylvania, as part of one of the largest network improvements in history.
Such rollouts should help expand its footprint and deliver high-speed broadband and 5G services into new geographies.
On March 2, VZ revealed an API proof of concept for Edge Discovery & Quality of Service (QoS) with Amazon Web Services, Inc. (AWS) that allows users to combine Dynamic Quality of Service (QoS) from VZ with AWS edge services. This combination should enable customers to deploy low latency, high bandwidth applications across a variety of emerging use cases.
On the same day, VZ declared a quarterly dividend of 65.25 cents per outstanding share, payable to its shareholders on May 1, 2023. The company’s four-year average dividend yield is 4.80%, and its current dividend of $2.61 translates to a 6.75% yield on prevailing prices.
Its dividend payouts have grown at a 2% CAGR over the past three years and a 2.1% CAGR over the past five years. Also, it has a record of 18 years of consecutive dividend growth.
In terms of trailing-12-month VZ’s net income margin of 15.53% is 359.1% higher than the 3.38% industry average. Likewise, its trailing-12-month EBIT margin of 24.20% is 197.3% higher than the industry average of 8.14%.
VZ’s total operating revenues came in at $35.25 billion for the fiscal fourth quarter that ended December 31, 2022, up 3.5% year-over-year. Its net income increased 41.4% year-over-year to $6.70 billion. Also, its EPS came in at $1.56, up 40.5% year-over-year.
Analysts expect VZ’s revenue to increase marginally year-over-year to $33.82 billion in the fiscal first quarter (ending March 31, 2023). Its revenue has grown at CAGRs of 1.2% and 1.7% over the past three and five years, respectively. The company has an impressive earnings surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.
VZ’s shares have gained marginally over the past six months to close the last trading day at $38.66.
VZ’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. It has a B grade for Stability. Out of 19 stocks in the Telecom - Domestic industry, it is ranked #4. Click here to see the other ratings of VZ for Growth, Value, Momentum, Sentiment, and Quality.
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK provides mobile, fixed, and cloud network solutions worldwide. The company operates through four segments Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
On March 23, NOK announced that CANARIE, the high-speed backbone of Canada’s National Research and Education Network (NREN), has chosen the Nokia 7750 Service Router as the IP/MPLS platform to support its robust provincial and territorial networks to each other and more than 100 NRENs around the world.
While deploying its services across an array of industrial sectors, NOK has extended its footprint to more than 560 private wireless customers globally. This should strengthen its leadership position in the private wireless networking space.
On March 13, NOK announced a partnership with Netplus Broadband, an ISP in India, to deliver future-proof and world-class broadband services in India. Under this agreement, Netplus would deploy NOK’s Multi-Access Gateway BNG, hosted on the FP5-based 7750 SR and the 7250 IXR, which offers a scalable and high-capacity infrastructure to scale its broadband services across Northern India.
This reflects the growing demand for the company’s services and solutions over its peers. Both companies are expected to benefit significantly by expanding their footprint and offerings in India.
In terms of trailing-12-month NOK’s EBIT margin of 10.95% is 137.6% higher than the 4.61% industry average. Likewise, its trailing-12-month net income margin of 17.06% is 530.1% higher than the industry average of 2.71%.
NOK’s net sales came in at €7.45 billion ($8.10 billion) for the fourth quarter that ended December 31, 2022, increasing 16.1% year-over-year. Moreover, its gross profit came in at €3.19 billion ($3.47 billion), up 25.8% year-over-year. Its profit for the period rose 363.5% year-over-year to €3.15 billion ($3.43 billion), while its earnings per share came in at €0.56, representing an increase of 366.7% year-over-year.
The consensus revenue estimate of $6.27 billion for the first quarter (ending March 31, 2023) represents an 11.5% increase year-over-year. The consensus EPS estimate of $0.08 for the current quarter indicates a 13.2% year-over-year growth. The company surpassed the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 13.4% to close the last trading session at $4.84.
NOK’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Value and B for Growth and Sentiment. Within the B-rated Technology - Communication/Networking industry, it is ranked #3 out of 49 stocks.
Click here to see the additional ratings for NOK (Momentum, Stability, and Quality).
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AVGO shares were trading at $637.54 per share on Friday afternoon, up $3.79 (+0.60%). Year-to-date, AVGO has gained 14.84%, versus a 6.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 of the Top 5G Stocks to Buy in April StockNews.com
