At first 5G wireless was touted as just “faster downloads.” But it’s much more than that. Economically, the 5G global infrastructure market is expected to grow from $2.55 billion in 2020 to over $42 billion by 2025. That’s a 75.1% CARG increase in just one market – far larger than many other industries could ever imagine in just five years. So, let’s look at your options for buying 5G stocks.
When you subject them to the strict criteria I programmed my Portfolio Grader to use, you’ll see that some 5G stocks make great buys – and others are best avoided.
For example…those of us who have monitored the 5G opportunity will recall that China is investing big in 5G. And I mean BIG: China’s tech ministers are expecting to invest 2.8 trillion yuan in 5G mobile networks by 2030. That’s roughly $400 billion!
That being the case, China Mobile (NYSE:CHL) stock might seem like a logical way to play 5G. Well…not when you run it through my Portfolio Grader:
CHL’s fundamental grades are almost wall-to-wall “C”s. There’s also one ugly “D,” due to downward revisions in Wall Street analysts’ earnings projections for China Mobile. Overall, the fundamentals aren’t strong enough to tempt me at Growth Investor.
CHL stock also earns a “D” for its Quantitative Grade. That reflects my proprietary formula for measuring buying pressure from big money on Wall Street, like mutual funds and hedge funds. So, to me, that says the U.S.-China trade war has not been kind to this stock. But until its fundamental grade comes up, it’s not a great long-term bet on the 5G future, either.
Then, for a more direct play on 5G, you might look at Ericsson (NASDAQ:ERIC), the Swedish telecom equipment company. Here’s ERIC stock’s report card:
In terms of the Quantitative Grade, ERIC’s is more respectable. But its fundamentals aren’t any stronger than China Mobile’s. In fact, Ericsson’s Earnings Momentum is actually worse. If bulls want to argue that ERIC stock has a bright future, it simply isn’t showing up in the numbers at this juncture.
The last of the 5G stocks I want to highlight is Ciena Corporation (NYSE:CIEN) stock. Now this is a nice Report Card:
Ciena is an American company, headquartered in Hanover, Maryland. It’s another telecom equipment company – but look at its earnings, and you’ll see why it pays to do your homework and find the strongest companies to invest with:
In September, Ciena beat expectations for both sales and earnings. Revenues rang in at $932.5 million for the previous quarter. That was 3% better than analysts had expected – and earnings were even better. At $112.3 million, earnings were 25% better than projected. This was also a 51.1% gain over the year-ago quarter!
CIEN stock has pulled back since then, which is probably why the Quantitative Grade is a step below its Fundamental Grade of “A.” But overall, Ciena is a B-rated “Buy” in Portfolio Grader.
Network equipment, especially fiber optics, is instrumental to the big telecoms deploying 5G, and that’s what CIEN brings to the table.
As an investor, I think we ought to be looking at the 5G wireless buildout as the way to profit from all this.
Essentially, whoever controls 5G is anticipated to control the internet several years from now. So, the long-term investment potential in 5G stocks is huge.
But instead of companies like China Mobile or even Apple (NASDAQ:AAPL) that need 5G networks to sell the corresponding products…
I think more money can be made in companies involved in the creation of 5G. That way we cash in on the whole meteoric rise of 5G.