Although 5G stocks hold huge growth potential, the market still performed poorly in September, according to market research firm CFRA. Given the statistical trend, investors looking to add to their portfolios this month may want to look to more conservative choices.
Fortunately, the 5G industry includes many low-risk options. Companies such as Intelligence (NASDAQ: INTC), Qualcomm (NASDAQ: QCOM), and Verizon (NYSE: VZ) could well serve investors in such a business environment. Let’s take a closer look at these three 5G actions to consider in September.
Granted, Intel may seem like an odd recommendation given its lack of revenue growth in recent years and its loss of technical leadership in the chip industry. However, with former CTO Pat Gelsinger now as CEO, the chipmaker is taking steps to revitalize its technology portfolio, incorporating 5G applications in development since before his tenure into the product line.
Intel has invested heavily in the Internet of Things (IoT), autonomous driving and data center innovations. It aims to provide users with high bandwidth for video streaming and broadband, low bandwidth for IoT sensors, and the ultra-low latency needed to drive self-driving cars.
It may take time for these efforts to have a positive impact on the company’s finances. Revenue fell 1% year-on-year to $ 39.3 billion in the first half of 2021. In addition, net profit fell 22% during the period to $ 8.4 billion , in part due to $ 2.6 billion in restructuring charges.
However, revenues from its IoT and Mobileye businesses grew by 47% and 124%, respectively, and cloud computing saw a 6% increase in revenues. Notably, Intel’s P / E ratio of 12 is much lower than AMDP / E of 39 or Nvidia‘s (NASDAQ: NVDA)Ratio of 80. Such a valuation not only lowers the risk for those who buy now, but also improves the growth potential available if 5G helps drive the Intel share price back.
Qualcomm occupies a unique position in the 5G industry due to its large and vital portfolio of wireless patents. No manufacturer can build a state-of-the-art smartphone without using Qualcomm’s technology.
Additionally, Grand View Research predicts a compound annual growth rate of 69% for the 5G chipset market, which will make Qualcomm’s position in the market all the more lucrative.
True, competitors are trying to claim some of Qualcomm’s market share. Apple bought the smartphone chipset business from Intel in 2019, likely to reduce or eliminate its reliance on Qualcomm. Nvidia is therefore continuing its efforts to acquire Own arms, which licenses low-power chips to Qualcomm. If Nvidia closes the deal, it could threaten Qualcomm’s position in the 5G market.
So far, these moves have not slowed Qualcomm down. For the first nine months of its 2021 fiscal year (which began September 28, 2020), revenue grew 60% year-over-year to $ 24.2 billion. That helped boost revenue 179% to $ 6.2 billion as the company kept operating expense growth below revenue growth.
Qualcomm had previously forecast some slowdown in the current quarter. Still, given that the forecast calls for revenues of $ 8.4 billion to $ 9.2 billion – about 35% annual growth midway through – gains should remain robust.
Despite all of this, investors have been relatively lukewarm about the stock. It has grown 23% in the past 12 months, and its P / E ratio of 18 is significantly lower than Apple’s earnings multiple of 30. Nonetheless, even if Apple or Nvidia become more direct competitors of Qualcomm, the industry’s growth and its currently low P / E should make it an attractive buy regardless of the market environment ahead.
Verizon is one of only three 5G wireless service providers in the United States. Most importantly, he has the potential to stand out from his peers AT&T and T Mobile. It has won numerous service quality awards, including being JD Power’s # 1 Grid Quality Award for 27 consecutive years. He has also shown his willingness to invest to maintain his advantage. Earlier this year, it spent $ 53 billion on C-band spectrum (including compensation costs and incentive payments). This spectrum will provide the necessary bandwidth to improve the quality of its 5G service.
Verizon has also heavily promoted its Network as a Service (NaaS) offering, a subscription-based wireless service for connecting AI, VR, and IoT devices. This has attracted clients such as Honda and Arizona State University.
5G could also serve as a catalyst for Verizon’s revenue growth. In the first six months of 2021, its revenue increased 7% year-on-year to $ 66.6 billion. In addition, net income of $ 11.3 billion rose 24%, although this was mainly due to pension payout gains and lower interest charges.
Even though Verizon’s stock price is languishing, its annual dividend per share is $ 2.51, which at current stock prices is earning about 4.6%. This high yield, combined with a history of annual increases in payments dating back to 2007, is a significant drag on selling. Additionally, the fact that its P / E ratio of 11 is far below the multiples of AT&T and T-Mobile could put sellers off.
Granted, the company’s $ 152 billion total debt could leave investors wondering if Verizon shares are a buy, given the $ 75 billion in equity. However, its low earnings multiple, high dividend and the potential of its NaaS business may make the weak telecommunications balance sheet worth overlooking.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.