We don’t hear about 5G as much as we used to. This is no longer a novelty in the telecom industry, but a necessity for businesses of all sizes. But even as the technology has become commonplace, that doesn’t mean there aren’t good 5G stocks for investors to buy.
It’s hard to believe, but all major wireless carriers are using 5th generation (5G) As a result of the speed of 5G wireless networks across the United States, businesses are using 5G for all kinds of applications.
One of the earliest ETFs created to provide exposure to 5G-related businesses was First Trust Index NextG ETF (NASDAQ:NXTG). NXTG’s website describes it as “a collection of companies that have committed, or are committed to devoting material resources to the research, development, and application of fifth-generation (“5G”) and next-generation digital cellular technologies. ” states the NXTG website.
This ETF consists of the 100 eligible stocks with the highest market capitalization. The ETF will then allocate 80% of the fund’s assets to 5G infrastructure and hardware and 20% to telecommunications service providers. Therefore, these two categories of stocks are each equally weighted.
You could buy NXTG to ride the future of 5G innovation, but let’s take a closer look at three stocks to buy from the ETF.
Nvidia (NVDA)
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Nvidia (NASDAQ:NVDA) appears on most people’s lists for all types of technology, including 5G. In September, the company Fujitsu (OTCMKTS:FJTSY) and wind river. This plan allows you to NTT Docomo The telecommunications industry’s first GPU-accelerated commercial Open RAN 5G service will be launched on a Japanese telecommunications network.
“When compared to standard networks based on proprietary solutions, DoCoMo says this new solution reduces TCO by up to 30%, improves network design utilization by up to 50%, and reduces power consumption at base stations by up to 50%. ” stated Nvidia’s September 26, 2023 technical blog post.
This solution is based on Fujitsu’s virtual convergence unit (vCU) and virtualized distributed units (vDU), the Nvidia Aerial platform, and Wind River’s distributed cloud platform.
Nvidia’s Aerial platform is also part of the chip designer’s AI-on-5G integration platform, helping businesses accelerate their digital transformation. Therefore, businesses can deploy and manage the platform on-premises or through an infrastructure provider.
Additionally, NVIDIA stock is already up 40% since the beginning of the year (YTD). If you are not a long-term investor, it makes sense to wait for a correction and buy in the low $600s.
Arista Networks (ANET)
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forbes Contributor John Markman recently discussed why investors should buy Arista Networks (New York Stock Exchange:ANET) Stock. Specifically, he argued about Bill Gates’ May 2023 claim. Gates said that personal digital assistants will change the way we interact with computers, potentially impacting the following major technology companies: Google Get out of the loop.
As Markman points out, Gates believes voice will replace computer keyboards and screens. Google will make its digital assistant available in a variety of products, potentially generating significant subscription revenue.
However, in order for Google to deliver all the information through your digital assistant, it will need to upgrade the network that transmits the data.
“Arista Networks manufactures critical hardware and software infrastructure. The Santa Clara, California-based company provides next-generation has become the leader in scalable switches, routers, and other networking equipment, and they are now rushing to upgrade their networks ahead of a barrage of new data-hungry AI applications,” Markman said. wrote in October 2023.
Unfortunately, the company’s stock has risen 42% in less than four months since Markman signaled he would buy Arista stock last October, when it dropped to $160. ANET stock is up 367% over the past five years, more than double its historical value. S&P500.
Despite the rally, I don’t think Markman’s premise for holding the stock has changed much, with 18 out of 27 analysts rating the company a “buy” or “strong buy.”
AI and 5G were mutually beneficial.
T-Mobile US (TMUS)
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T-Mobile US (NASDAQ:TMUS) had the best performance over the past year among the top three 5G wireless carriers in the United States. The company’s stock price has increased by 13.1% in the past 52 weeks, while it was -0.6% in the past 52 weeks. verizon communications (New York Stock Exchange:VZ), -10.2% AT&T (New York Stock Exchange:T).
Oppenheimer analyst Tim Horan released a report on wireless carriers in late January. He maintains a buy rating on TMUS stock and a price target of $190. This is 19% above the level it is currently trading at.
As Horan points out, the company has led the industry’s growth in terms of subscriber growth. Specifically, in 2023 he added 1.3 million postpaid accounts. And it has the only “true” 5G network in the United States. Also, he feels that the price-to-cash flow ratios of all three companies are very low. As it is, the free cash flow yield will rise.
Adjusted free cash flow in 2023 will be $13.59 billion, up 77% from 2022, giving the company a free cash flow yield of 4.5% based on an enterprise value of $300.2 billion. 4% to 8% is fair value. Additionally, the company’s forward FCF yield is 5.5% based on projected adjusted free cash flow of $16.58 billion in 2024 (up 22% from 2023).
As the company noted in its Q4 2023 press release, approximately 300 million Americans (98% of the US population) are covered by the company’s Ultra Capacity 5G network.
It remains the best stock among the three stocks I own.
On the date of publication, Will Ashworth did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
