5G wireless standards are about to shake up the cellphone market. Faster and more reliable data connections will create some brand new markets and breathe new life into some older ones. Internet of Things devices will appear absolutely everywhere, supported by networking standards that can handle many more data lines per wireless base station. Remember when 4G services made it possible to enjoy high-quality video streams on your phone or tablet? That was impossible in the 3G world, and now everyone is doing it. The change from 4G to 5G will be just as game-changing.
Here are three stocks that will make a mint on the rollout of 5G services across America and around the world. Picking up a few shares of these companies now will let you share their success over the next few years.
Skyworks Solutions (NASDAQ:SWKS) makes analog semiconductors that translate data streams into radio signals, or vice versa. These chips are found both in your mobile devices and in the network operator's network infrastructure equipment.
The company is already enjoying solid orders for 5G radio chips. Sixty percent of all new smartphones sold in China come with 5G networks, according to Skyworks CEO Liam Griffin. Other markets will follow China's example over time. The best part of that development is that the 5G products are much more valuable than their 4G cousins. In other words, Skyworks is increasing its revenue share of each new smartphone.
"You could be looking at platforms that in a 4G world maybe offered $4 to $5 for us," Griffin said in July's third-quarter earnings call. "In a 5G world, it could be $8 to $10 or even $15."
Griffin expects the 5G market to explode over the next few years, having started in the recently completed third quarter with a small number of 5G handsets hitting store shelves. Five years from now, he sees roughly three billion 5G subscribers worldwide, so the growth opportunity here is incredibly strong. Don't forget that Skyworks pairs the rising unit volumes with doubling or maybe even tripling its money-making presence in each device.
The stock is setting fresh all-time highs nearly every day right now and has gained 22% in 2020. Skyworks isn't exactly cheap today but the company has a clear path to massive growth in the 5G era.
Ericsson (NASDAQ:ERIC) is a leading supplier of wireless network equipment and services. The Swedish company sits in a unique catbird seat as 5G networks are rolling out around the globe. Chinese rivals ZTE and Huawei have been banned from doing business in the U.S. and a few other Western markets, opening up a larger window of opportunity for Ericsson and Finnish sector peer Nokia (NYSE:NOK). As noted above, all of this is happening at an important time in the history of telecommunications, where a small number of hardware makers are fighting over a huge global market, one contract at a time.
I like both Nokia and Ericsson here, but the Swedes have an advantage that could come into play if Chinese authorities choose to block the export of telecom gear made in China to other countries. Ericsson has a brand new factory in Texas, and that facility has already started delivering 5G base stations to Verizon (NYSE:VZ). The political tension between Beijing and Washington plays right into Ericsson's hands, potentially boosting the company's market share in 5G installations.
Rogers (NYSE:ROG) is a leading provider of engineered materials to a variety of industries. You'll find Rogers' materials in automotive radar sensors, shock-absorbing shoe soles, medical wound dressings, and wireless antenna systems.
Like Skyworks, Rogers is selling more advanced products at higher price points into the 5G market. Rogers is also pursuing "significant growth opportunities" on both the handset and infrastructure sides of the mobile communications market.
"Design changes incorporated in 5G handsets are creating a greater content opportunity for Rogers' advanced materials in the range of 10% to 15% versus 4G phones," CEO Bruce Hoechner said in July's second-quarter earnings call.
This is the most affordable stock among my three recommendations today. Rogers is trading at just 21 times forward earnings after sliding 4% lower in 2020.