Fifth generation (5G) technology gained popularity in 2021, as evidenced by the massive surge in sales of smartphones supporting the new wireless standard. Gartner estimates that 538 million 5G smartphones are expected to be sold in 2021, up from 213 million units last year.
Investors looking to take advantage of this trend have several options available to them. Apple (NASDAQ: AAPL), Materials applied (NASDAQ: AMAT), and Qorvo (NASDAQ: QRVO) are a few stocks that investors may consider buying to benefit from the growing adoption of 5G networks and smartphones. Let’s see why.
The era of 5G smartphones has been a boon for Apple. According to IDC’s smartphone shipment tracking, the company shipped 50.4 million iPhones in the third quarter. This is a good jump of 20.8% from the quarter last year. Additionally, Apple’s market share in the global smartphone space increased to 15.2% in the quarter, propelling the company to second place in the rankings after Samsung.
Note that Apple held an 11.7% share of the global smartphone market in the same period last year, while it was third in the ranking after Samsung and Xiaomi. Apple also saw an increase in shipments at a time when the global smartphone market was contracting. This is an indication that the launch of the 5G-enabled iPhone 12 in November 2020 has proven to be a major catalyst for Apple. The recently launched iPhone 13 is expected to support Apple’s strong sales growth. That’s because Apple is now offering a wider range of 5G smartphones to consumers at different prices starting at $ 599.
Strategy Analytics estimates that Apple’s share of the 5G smartphone market could increase to 40% after the launch of the iPhone 13, from the current 29%. Such a growth in market share seems achievable given that Apple reported a massive installed base of over 1 billion iPhone users earlier this year. The iPhone 12 had shipped 100 million units in April 2021, leaving hundreds of millions of iPhone users waiting to upgrade to a 5G device.
All of this shows that the strong momentum in Apple iPhone sales is here to stay. The company had seen a 47% year-over-year growth in iPhone revenue in the fourth quarter of fiscal 2021 to $ 38.9 billion, a trend that may continue, driven by higher volumes and higher average selling prices, making Apple one of the best 5Gs. shares to buy now.
2. Materials applied
Apple’s 5G iPhones are in high demand, but the company is struggling to make enough devices. Apple reportedly envisioned a production shortfall of 10 million iPhones due to a chip shortage. This is where Applied Materials comes in, as it addresses a key issue facing Apple.
The company supplies chipmaking equipment to semiconductor foundries, and has seen a surge in demand for its offerings since last year, as the global appetite for chips has grown. Its revenue for the third quarter of fiscal 2021 jumped 41% year-over-year, while adjusted profit climbed 79% from the prior year period to $ 1.90 per action.
More importantly, Applied Materials should be able to sustain this tremendous growth in the years to come. The demand for semiconductors is expected to increase dramatically as the industry’s revenues are expected to reach $ 1 trillion by 2030. Rising demand for 5G chips will be one of the pillars for the growth of the semiconductor industry. -conductors.
But smartphones won’t be the only catalysts for the growth in 5G chip consumption. According to a third-party estimate, the global 5G chipsets market could register an annual growth rate of 69% through 2028, driven by various use cases such as smartphones, routers, telecom base stations, l ‘Internet of things and industrial applications, among others.
As such, it’s no surprise why semiconductor foundries are increasing their infrastructure investments. Micronic technology, for example, described an investment of $ 150 billion over the next decade to build capacity. While TSMC pointed out earlier this year that it plans to invest $ 100 billion to increase production. As a result of these favorable winds, analysts expect Applied Materials earnings to grow at an annual rate of nearly 27% over the next five years. This makes it one of the best semiconductor stocks to buy right now, as it trades at just 25 times earnings, which is cheaper than the S&P 500an average of 29.
Qorvo enables investors to benefit not only from the growth in 5G smartphone sales from customers like Apple – since it accounted for 30% of its total revenue in fiscal 2021 – but also from the side infrastructures. We’ve already seen how Apple is expected to dominate the 5G landscape, and it’s going to rub off positively on Qorvo. This is clear from the company’s second quarter of fiscal 2022 results, which showed an 18% jump in revenue to $ 1.3 billion from the period last year. Profits at the chipmaker rose to $ 3.42 per share in the quarter from $ 2.43 last year, an increase of nearly 41%.
The mobile business was a key driver of this growth, registering 32% year-over-year growth in the quarter to $ 996 million due to the “continued growth of higher-content 5G smartphones. “. It should be noted that Qorvo has a diverse mobile customer base which includes “Honor, OPPO, Pixel, Samsung, Vivo and Xiaomi”. As 5G smartphone shipments are expected to exceed 1.1 billion units by 2025, which would be double this year’s estimates. Qorvo is in a good position to take advantage of the end market opportunity as its chips are used by major OEMs (original equipment manufacturers).
Qorvo’s infrastructure business is also expected to accelerate due to investments in 5G infrastructure. The company announced design gains to supply chips for small cell sites and base stations to support 5G deployment at various OEMs in the last quarter. Additionally, Qorvo says its addressable market in the infrastructure segment will grow significantly in 2022 and show a “strong double-digit CAGR through 2025”.
Qorvo gives investors the ability to cast a wider net on the 5G opportunity – which makes buying the stock right now a good idea, given that it is trading at just 21 times the trailing earnings .
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.Source link