5 Best 5G stocks to Buy in October 2021

The 5G ecosystem which includes software as well as hardware companies, is among the most prominent long-term investing themes. Also, there are ancillary industries that would benefit from the growing 5G adoption. Several companies are at the forefront in the 5G transformation. Here are the five best 5G stocks that you can buy in October 2021.

1. Analog Devices (NYSE: ADI)

Analog Devices is a semiconductor company and has a leading position in the design and manufacturing of analog, mixed-signal, and DSP integrated circuits. The pivot towards 5G is a major long-term driver for ADI stock and the market potential for the company would be almost four times in the 5G ecosystem as compared to the 4G ecosystem.

ADI stock is up 23% for the year and hit its 52-week high in yesterday’s trade. The stock has a dividend yield of 1.5% which is slightly higher than the S&P 500’s dividend yield. Wall Street analysts are also reasonably bullish on the stock and its median target price of $200 is a premium of around 11%. Of the 28 analysts covering the stock, 22 rate them as a buy while five have a hold rating. One analyst has a sell rating on the stock.

ADI stock trades at an NTM (next-12 months) PE multiple of 25.7x which is a premium over its long-term multiples. However, the stock’s valuation multiples have expanded amid the optimism over the 5G supercycle. ADI is among the best 5G stocks that should be on your watchlist in October 2021.

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2. Nokia (NYSE: NOK)

Nokia is among the best 5G stocks. The stock has fallen sharply from the peaks that it hit during the Reddit frenzy but is still up over 46% for the year. The company has been trying to regain market share in the 5G market. Its efforts have been aided by the geopolitical environment where a lot of companies have been wary of inviting Chinese companies for the 5G telecom gear. Several countries have already barred Chinese companies from the 5G infrastructure and many others including India are expected to follow suit.

Nokia is a good 5G stock to buy

Nokia is aiming for a market share of 25-27% in the global 4G/5G market in 2021. This does not include the Chinese markets. In its second-quarter earnings release, Nokia said that it has over 150 core 5G customers. The company is scheduled to release its third-quarter earnings tomorrow. During the company’s second-quarter earnings call, it had raised the full year 2021 guidance. It expects to post revenues between €21.7 billion to €22.7 billion in the quarter. The company expects a comparable operating margin between 10-12% which is higher than the previous guidance of 7-10%. Nokia also expects to be free cash flow positive in the year.

Looking at the long-term picture, Nokia expects its revenues to grow faster than the market in 2023 and expects comparable operating margins to be between 10-13% in the year. All said, given the global 5G rollout and the prevailing geopolitical developments, Nokia looks among the best 5G stocks to buy in October 2021. The stock is trading slightly below the 50-day SMA (simple moving average). If it can cross above the price channel, it would indicate technical bullishness in the stock.

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3. Qualcomm (NYSE: QCOM)

QCOM is among the best 5G stock as its chips enable 5G technology also. The stock has come off its 52-week highs and is up about 4% for the year. The stock also pays a dividend and at current prices, the yield is around 2% which is higher than the S&P 500’s dividend yield.

Wall Street finds QCOM as a good 5G stock to buy

QCOM has a median target price of $176 which is a premium of over 33%. Its street high target price of $303.71 is a premium of over 130% while the street low target price of $137 is also 3.8% above the current stock price. It has 19 buys and 11 hold ratings. None of the analysts rates the stock as a sell.

Last month, Raymond James reiterated the stock as a buy pointing to “very attractive” risk-reward. “Finally, we think it’s possible that QCOM could still retain all or part of the Apple business, especially given the complexity of mmWave, which is increasing in importance to iPhone, and only QCOM currently has the ability to supply that technology,” it said in its note.

The brokerage added, “Net, given our near-term expectations for numbers to move higher, a reasonable valuation even excluding Apple, the likelihood that QCOM retains this business through iPhone 14, and the potential that QCOM doesn’t lose the business after all, all adds up to a very attractive risk/reward.”

QCOM looks like an attractively valued 5G stock

Meanwhile, QCOM stock is not looking too bullish on the charts and trades below both the 50-day and 200-day SMA. The stock would need to cross above these price channels to signal a technical uptrend. However, from a fundamental perspective, QCOM looks attractively priced with an NTM PE of just under 15x. Overall, QCOM looks like a good 5G stock to buy.

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4. Apple (NYSE: AAPL)

The pivot towards 5G is also fuelling a smartphone supercycle as more people are upgrading to 5G phones. Smartphone companies like Apple are among the biggest beneficiaries of higher 5G adoption. In the short term, Apple’s forecast has been clouded by the chip shortage situation and apprehensions about the iPhone 13 which disappointed some analysts. However, in the medium to long term, the company would benefit from the growing adoption of smartphones. Apple’s foray into electric and autonomous cars would also add value for shareholders.

Apple is a proxy way to play the 5G industry

Apple is a proxy way to play the 5G industry. The stock has come off its 2021 highs. However, it should recover and go back up. Incidentally, Berkshire Hathaway is the second-largest Apple shareholder and chairman Warren Buffett has been quite bullish on the stock.

While Apple’s current valuations are higher than historical averages, the stock has seen a valuation multiple rerating amid the pivot towards high margins services business. The stock is looking bullish on the charts also and after finding support at the 200-day SMA, it has now also crossed above the 50-day SMA.

If you are looking at a 5G stock that would benefit from the growing adoption of the 5G technology, Apple would fit the bill.

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5. AT&T (NYSE: T)

Telecom companies like AT&T are also good ways to play the 5G transformation. Meanwhile, T stock has been a consistent underperformer and is trading with a YTD loss even as the US stock markets are near record highs. The stock has shed a third of its market cap over the last five years.

Wall Street is turning bullish on T stock

Meanwhile, after the massive underperformance, Wall Street analysts are turning bullish on T stock and earlier this month, KeyBanc upgraded it to a buy citing its attractive valuations. However, the brokerage also cautioned that the stock could be a value trap. T also pays a fat dividend and at current prices, the yield is above 8%. The NTM PE is around 8X which makes T an attractively priced 5G stock to buy in October.

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