Picking the best 5G stocks has proved challenging since wireless service providers began rolling out 5G wireless services over five years ago. Heading into 2024, investors are still waiting for 5G revenue streams to make a significant impact for AT&T (T), Verizon Communications (VZ) and T-Mobile US (TMUS).
XIn 2023, TMUS stock climbed 14% but still underperformed vs. the S&P 500. It rose 24%. VZ stock fell 4%. T stock tumbled 9%.
5G Stocks: Broadband Only Revenue Driver?
As it stands, the U.S. wireless firms are using 5G services as a marketing tool to upgrade subscribers to premium plans. No new 5G consumer apps have emerged to drive data usage, unlike the 4G service era that took hold in 2011. In the 4G era, ride-hailing apps from Uber Technologies (UBER) and video streaming apps drove data usage.
T-Mobile and Verizon are furthest along in rolling out 5G broadband to homes, called "FWA," for fixed wireless access within the industry.
T-Mobile and Verizon offer discounts on bundles of 5G broadband and cellphone services. AT&T plans to ramp up 5G FWA in 2024. Dish Network's (DISH) 5G broadband services have yet to gain traction, analysts say. Still, FWA overall is a factor in slowed broadband subscriber growth at cable TV companies.
Morgan Stanley analyst Simon Flannery holds an upbeat view on 5G broadband for T stock, VZ stock and TMUS stock.
"FWA adoption has room to run in 2024 with service revenue upside to follow," Flannery said in a report. "While subscriber growth rates are moderating, we believe FWA will continue to gain broadband share, particularly in suburban and rural markets in coming years, on the back of 5G deployments and an attractive price/value equation. We believe expectations of an imminent slowdown due to anticipated congestion issues are unlikely to occur on a broad scale given careful network management practices by the carriers and deep mid-band spectrum holdings."
T-Mobile aims to sign up 7 million to 8 million 5G fixed broadband subscribers by 2025, with services available to about 40 million US. households. Verizon is targeting 4 million to 5 million 5G fixed broadband customers by 2025. It aims to reach 50 million U.S households.
Apple Readies Vison Pro Mixed-Reality Headsets
Apple (AAPL) remains one 5G stock in the consumer space to watch amid the expected 2024 rollout of Vision Pro mixed-reality headsets. AAPL stock surged 48% in 2023.
In 2023, Qualcomm (QCOM) announced a new chip supply agreement with Apple that covers all iPhones through 2026. A prior deal was set to end with the 2024 iPhone launch.
Analysts bullish on 5G stocks still expect new business services to be delivered via cloud computing. But the 5G enterprise market has ramped more slowly than expected. Oppenheimer recently hosted its annual 5G conference.
"The infrastructure is in place and the ancillary ecosystem of standards and devices is starting to kick in," said Oppenheimer analyst Tim Horan in a report. "Premium priced plans and (fixed broadband) are now driving revenues. Private networks and the Internet of Things are gaining traction. The industry is seeing solid revenue growth and converging to the cloud to lower expenses. We think Wall Street is underestimating the increases in wireless capacity, fixed wireless broadband subscribers and free cash flow growth."
5G Long-Term Vision Intact?
At market research firm Dell'Oro Group, analyst Stefan Pongratz offered a mixed view in a recent report.
"When we compare where 5G is today relative to where we thought we would be five years ago, the main disconnect is with the existing use cases," Pongratz said. "Operator revenues have stayed mostly flat, also in line with expectations. (However), there is nothing wrong with a little bit of optimism and thinking big, as long as we can separate the long-term vision from short-term expectations."
Once viewed as among the best 5G stocks, network gear makers Ericsson (ERIC) and Nokia (NOK) have lagged. Ericsson, though, recently won a big software contract from AT&T.
Meanwhile, investors should look for updates on company earnings calls as more smartphones, laptops, autos and internet-connected industrial devices use 5G technology.
However, most automakers continue to use 4G technology in new models. In the low-end phone market, many makers of devices using Android software also continue to use 4G technology.
In time, the breadth of 5G stocks could expand. Also, pundits expected 5G wireless to have a role in manufacturing automation, cloud gaming, autonomous vehicles, drones and remote health care services.
Industrial applications include connecting low-power sensors to machinery and machinery parts, enabling factories, airlines, automakers, and other industrial operators to proactively monitor and manage equipment repairs and replacements.
In addition, companies such as Verizon are finally moving traffic to stand-alone 5G "core" networks. That will impact what types of network gear they purchase.
Cloud Computing, 5G Wireless Synergy
In the long run, 5G wireless services delivered to businesses via cloud computing giants like Amazon.com (AMZN), Microsoft (MSFT) and Alphabet's (GOOGL) Google could offer the best 5G stocks. Many startups are active in "edge computing."
Further, cloud computing infrastructure is expected to play a big role in deploying 5G wireless services.
Edge computing deploys data processing, storage and networking close to sensors and where other data originate, near the "edge" of the network. Further, the goal is to process and analyze data locally in real time rather than send it to faraway data centers in the cloud.
Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), Nokia and others aim to capitalize on edge computing.
Semiconductor stocks offered an early play on 5G wireless and remain an opportunity. Investors have been cautious on 5G network gear makers and other infrastructure plays, like cellphone tower operators.
5G Stocks: Semiconductor Plays
Aside from Qualcomm, other companies that make chips built into smartphones include Qorvo (QRVO), Marvell Technologies (MRVL), Skyworks Solutions (SWKS) Cirrus Logic (CRUS) and Analog Devices (ADI).
For some 5G stocks, the long-term opportunity will be tied to new networks that blur the line between mobile and fixed-line infrastructure.
Some chipmakers sell into the 5G network gear market. They include Marvell, Broadcom (AVGO), Intel (INTC), Texas Instruments (TXN) and Analog Devices. Meanwhile, Xilinx (XLNX) makes programmable chips built into prototype network gear.
A wide range of tech companies are building 5G ecosystems for private networks that deliver business-to-business services.
In many industrial settings and company campuses, 5G infrastructure was expected to displace Wi-Fi-based services. But the Wi-Fi market has proved resilient.
5G Stocks: Cell Tower Operators
Cellphone tower operators American Tower (AMT), Crown Castle and SBA Communications (SBAC) also could get a 5G boost, analysts say. Crown Castle will be a 5G infrastructure partner of Dish Network.
Moreover, 5G networks will connect to fiber-optic networks for "long haul" purposes. That will provide reliability for emerging automotive, robotics and medical applications. Potential 5G stocks to buy include Corning (GLW), Ciena (CIEN) and other fiber-optic players.
Meanwhile, Crown Castle makes "small-cell" radio antennas for 5G services in urban areas. The small-cell antennas — hung on utility poles or building rooftops — will require fiber-optic connections to local hubs. Local government approval, though, is required to expand 5G networks.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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