5 Best 5G Stocks to Buy in August 2021

With 5G networks being progressively rolled out in multiple corners of the world but with the technology still in its early stages of adoption, investors have the chance to buy shares of companies that are favorably positioned to benefit from this innovative technology at a point when the market might not be fully pricing in its potential.

To help you in shortlisting your potential candidates for building a robust portfolio of companies exposed to 5G, the following article takes a closer look at five names that display the kind of financial robustness, positive past performance, and promising outlook that could produce further upside once the technology is fully implemented.

#1 – Advanced Micro Devices (AMD)

Advanced Micro Devices just reported an exceptional second quarter of 2021 where sales jumped as much as 99% compared to a year ago while gross margins showed a significant improvement moving from 43.9% last year to 47.5% by the end of these last three months.

Meanwhile, earnings per share landed at $0.63 for a 250% year-on-year jump and they also leaped 9 cents higher than the previous quarter’s readings.

In May this year, the firm announced that it will be buying back over $4 billion in stock of which only $256 million have been deployed while forecasts point to more growth ahead for the firm’s earnings, with bottom-line profitability expected to surge by 20% on average in the following two years.

Being a conservatively financed company that has only $553 million in long-term debt and over $3.8 billion in cash and equivalents while trading at a fairly conservative forward P/E multiple of 40, AMD is one of the most attractive 5G picks amid its robust financials, growth prospects, and positive past performance.

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#2 – Verizon Communications (VZ)

Verizon is reportedly one of the first carriers to deploy a 5G network in the United States, currently providing coverage to over 2,700 cities while serving around 230 million customers as a result.

Its profits margins have been improving lately and the company just reported a great second quarter that included an upward revision of its EPS guidance for the year from a previous range of $5 to $5.15 to a new range of $5.25 to $5.35.

The stock currently offers a very attractive 4.5% dividend yield that results in a 50% payout ratio based on the company’s forecasted earnings for the year. This dividend seems fairly well covered based on its historical cash flow generation capacity.

Currently trading at only 10 times its forecasted earnings for the year, the market is clearly not pricing the positive impact that a full-blown implementation of 5G could have on Verizon’s financial performance as faster broadband could lead to higher data consumption volumes amid the launch of innovative technologies that incorporate augmented reality (AR) and virtual reality (VR) features.

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#3 – Crown Castle International Corp (CCI)

Crown Castle is a specialized real estate investment trust (REIT) that owns more than 40,000 cell towers and thousands of miles of fiber optics in the United States and the company is fully preparing to embrace the demand coming from carriers seeking to expand their 5G coverage across the country.

This REIT is currently offering a 2.75% dividend and distributions are expected to grow at a rate of 7% to 8% per year – fairly in line with the company’s past growth.

So far this year, shares of this 5G-exposed REIT have risen 23.6% on top of a 15.5% jump they reported last year. Alongside the dividend, this past performance has been fairly attractive while this REIT plans to invest billions in the deployment of small nodes that will serve as mission-critical infrastructure to deploy 5G networks across the States.

According to its plans, the company believes that shareholder value could be expanded as a result of these deployments once the pace at which 5G networks are being rolled out increases.

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#4 – Marvell Technology (MRVL)

Marvell sells key components needed to power 5G devices and the latest financial performance of the firm has made it stand out as a robust pick for those who are preparing for the widespread adoption of 5G across the world.

In the past year, sales moved 10% higher at $2.97 billion while gross margins stood at 51%. Even though these margins have been deteriorating lately, they continue to be quite attractive as they have enabled the firm to report net margins of around 25%.

Meanwhile, during the first quarter of 2021, the company’s revenues and bottom-line profitability surpassed analysts’ estimates while shares are up 31% so far this year. Moreover, the company’s stock appreciated by over 80% last year as the demand for its components is at its highest on the back of an ongoing global chip shortage.

Moving forward, analysts are expecting to see earnings per share growing at an average annual rate of 35% – a percentage that makes the current forward P/E multiple of 40 looks rather conservative for a firm in such a promising sector.

In regards to its solvency, the firm has a long-term debt of $4.7 billion at the moment on assets of $21.3 billion including $17.8 billion in intangibles and $522 million in cash.

Due to its direct exposure to the growing demand for 5G components, Marvell is a prominent pick to consider even though investors should keep an eye on how the firm’s leverage evolves as debt levels are fairly elevated for a company with such a high percentage of intangibles in its balance sheet.

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#5 -Defiance Next Gen Connectivity ETF (FIVG)

For those who prefer to take a more conservative approach when incorporating 5G stocks into their portfolio, the Defiance Next Get Connectivity ETF offers diversified exposure to this promising segment of the tech industry as it currently invests in 91 different companies with the potential to benefit from the adoption of 5G across the world.

At the moment this is written, AMD remains the largest holding of the fund, currently accounting for 6.7% of its assets, followed by Qualcomm (QCOM) and Analog Devices (ADI). The fund’s top 10 holdings currently account for 36% of FIVG’s total assets while assets under management are standing at $1.3 billion.

The fund charges an annual 0.3% expense ratio and a 0.93% dividend yield. So far this year, FIVG has delivered a 16% gain for investors on top of the 30% gain reported during 2020.

67% of all retail investor accounts lose money when trading CFDs with this provider.