Qualcomm, Skyworks, Qorvo: 5G Stocks Benefit From iPhone 12 Tailwinds

by Trefis Team
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5G has emerged as a hot investment theme this year. While major U.S. carriers have been upgrading to the next-gen technology for over a year now, consumer adoption is also likely to pick up meaningfully as Apple (NASDAQ:AAPL) has embraced the technology relatively early in the cycle, equipping its entire flagship iPhone 12 line-up with 5G radios. Carriers are also heavily promoting 5G devices, with the new iPhones effectively available for free for subscribers with trade-ins and some other commitments. As 5G adoption grows, it should have a positive impact on demand across a wide range of companies, ranging from semiconductor players, tower infrastructure companies, testing equipment manufacturers, and wireless carriers. Moreover, 5G technology is likely to find much broader applications beyond smartphones, potentially in areas such as industrial automation, driverless cars, healthcare, and smart cities. Our indicative theme of 5G Stocks – which includes U.S. listed companies that stand to benefit from 5G upgrades – is up by 27% year-to-date, compared to an 11% gain for the S&P 500. Qualcomm (QCOM) was the biggest driver of the theme’s return, as it rallied by 68% year-to-date. On the other side, Verizon (VZ) stock is down by about 2% year-to-date.

[Updated 10/7/2020] Verizon, Qualcomm, Qorvo: Stocks To Watch As Apple Preps 5G iPhones

Our indicative theme of 5G stocks – which includes semiconductor players, tower infrastructure companies, testing equipment providers, and wireless carriers that stand to gain from the next-generation networks –  is up by about 19% year-to-date, versus 5.5% for the S&P 500 as of 10/7/2020. While 5G wireless networks are being rolled out in the U.S. and other developed markets, mainstream adoption of the technology is likely to gather pace as Apple (NASDAQ:AAPL) – one of the largest and most iconic smartphone vendors – is set to unveil its first set of 5G handsets next week. Below, we provide a bit more about some of the companies in our theme, how the 5G upgrade cycle could benefit them, and how they have fared thus far in 2020.

Qualcomm (QCOM), one of the largest modem and mobile processor vendors, is seen as a leader in 5G wireless technology. The company could see sales pick up as smartphone behemoth Apple is widely expected to use Qualcomm’s modems in its new iPhones. The stock is up 38% year-to-date.

Skyworks Solutions (SWKS) sells analog semiconductors that include power amplifiers, front-end modules, and radio frequency (RF) products that go into mobile and wireless devices as well as wireless infrastructure equipment. The company counts Apple as one of its biggest customers. The stock is up 23% this year.

Qorvo, Inc. (QRVO)also supplies RF components to smartphone players such as Apple, as well as to the infrastructure, and defense space. The stock is up 13% this year.  (See our analysis Is Skyworks A Better Bet Than Qorvo?)

American Tower Corp (AMT)the largest U.S.-based tower leasing company, is structured as a real estate investment trust (REIT). Tower companies stand to gain from 5G considering that antennas and other equipment for 5G are heavier and larger, meaning that rentals could also be higher. The stock is up about 6% year-to-date.

Verizon (VZ) , one of the largest U.S. wireless carriers, stands to benefit from 5G related subscriber additions and potentially improved pricing for 5G plans. The stock has remained roughly flat year-to-date.

Keysight Technologies (KEYS)provides electronics test and measurement equipment and software targeted at the wireless sector. Keysight should benefit as the 5G rollout gathers speed globally, as equipment and chip manufacturers who want to design and develop 5G products likely require its testing and measuring solutions. The stock is down 3% year-to-date.

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