Many telecommunications and technology companies have invested heavily in 5G, which stands for fifth-generation cellular wireless, in recent years. The new gold standard in wireless technology provides greater download speeds, lower latency and the ability for networks to connect more devices. Data analysts project 5G transfer speeds to be five to 10 times faster than 4G LTE, which opens the door for improved video streaming, more augmented and virtual reality applications, increased Internet of Things (IoT) innovation, and revolutionizing domains such as autonomous cars and smart cities.
According to market research firm International Data Corporation (IDC), 5G global infrastructure spending is set to grow from $528 million in 2018 to $26 billion in 2022 – a compound annual growth rate (CAGR) of 118%. In other news relating to 5G spending, reports surfaced late last week that President Trump met with Cabinet officials to revive a significant infrastructure plan and discussed, among other items, how it would incorporate funding for a next-generation 5G network, per Reuters.
Investors who want exposure to companies that are well positioned to benefit from increased 5G spending should take a closer look at these three stocks.
Verizon Communications Inc. (VZ)
Telecommunication conglomerate Verizon Communications Inc. (VZ) has a first-to-market advantage over other big players when it comes to offering 5G. Verizon customers in Indianapolis, Houston, Los Angeles and Sacramento already have access to a 5G broadband internet service named 5G Home. The New York-based company plans to expand coverage aggressively throughout 2019 and roll out its 5G mobile service. As of Jan. 22, 2019, Verizon stock has a market capitalization of $235.90 billion, offers a 4.24% dividend yield and is up 2.62% for the year. A low price-earnings ratio (P/E ratio) of just 7.3 makes the company cheaper than many of its competitors.
Despite pulling back sharply in December, Verizon stock finished 2018 with a year-to-date (YTD) gain of 11.26%. Investors should consider buying retracements to the $52 area, where the price finds support from the 200-day simple moving average (SMA) and a horizontal line that connects the January 2018 swing high and December swing low. If the stock breaks above its 52-week high of $60.94, look to buy the first retest of that level.
Cisco Systems, Inc. (CSCO)
Late-'90s tech darling Cisco Systems, Inc. (CSCO) has repositioned itself as a cloud computing and subscription-based software market leader. Cisco, through its Cloud-to-Client approach, plans to offer more flexible software-based alternatives to traditional networking hardware that allows telecommunication companies to provide 5G service on their existing network without the need for significant infrastructure upgrades. Cisco stock has a YTD return of nearly 5% and pays investors a 2.99% dividend yield as of Jan. 22, 2019. It has a market cap of $202.45 billion.
The Cisco share price struggled to gain traction in 2018, spending the majority of the year stuck in a trading range. Those who wish to purchase the stock should seek an entry point near $41, where the price encounters support from the low end of last year's sideways price action. If no pullback occurs, watch for a breakout above the October and December swing highs at the $48.50 resistance level.
Nokia Corporation (NOK)
Nokia Corporation (NOK), once a dominant leader in the cell phone market, has reinvented itself as an equipment provider capable of landing large contracts with major carriers who offer 5G services. Nokia has already signed a $3.5 billion multi-year agreement with T-Mobile US, Inc. (TMUS) that will help build the wireless network operator's 5G network by providing technology, software and services, per a MarketWatch article. Nokia stock, with a market cap of $33.77 billion and yielding 3.97%, has a YTD return of 4.98% as of Jan. 22, 2019.
The Nokia chart shows range-bound price action for most of 2018, with the 50-day simple SMA crisscrossing the 200-day SMA several times throughout the year as the bulls and bears fought for control. Look to buy pullbacks to $5.60, where the stock finds support from a four-month uptrend line. If price breaks above the current trading range at $6.20, traders could use the breakout area as a new support level to place a buy limit order.