Three Ways to Play 5G

08/04/2020 5:00 am EST

Focus: TELECOM

Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

This was supposed to be the year that 5G networks became a reality across much of the U.S. Telecoms and equipment manufacturers were ramping up the 5G rollout, with plans to upgrade our nation’s mostly 4G network to 5G, asserts Ian Wyatt, editor of Million Dollar Portfolio.

Then Covid-19 hit. As the pandemic as ravaged not just the U.S. but the world, telecom operators from Ohio to China have had to go into cash-conservation mode. The good news is that this should just be a bump in the road. While the 5G rollout may have slowed down, it’s hardly stopped.

While Viavi Solutions (VIAV) won’t release its latest earnings report until Aug. 11, its shares have made a strong recovery since dipping back in March. The firm makes equipment to maintain the integrity and functionality of 5G networks.

Again, we won’t have a lot of visibility on the actual effect COVID-19 has had on the business until that earnings report is released, but the markets are betting the effect has been relatively minimal.

Ericsson (ERIC) has been pushing steadily higher. When Ericsson released earnings earlier in July, it reported that while revenue had edged up 1%, earnings were up 67% year-over-year to $0.10 per share.

Thanks to sharp cost-saving moves, margins widened, improving earnings. Ericsson has also continued locking in new customers. It recently signed a new multi-year deal to supply 5G equipment to Deutsche Telekom and other equipment to U.S. Cellular. Frankly, business is going well for Ericsson, pandemic or not.

Akoustis Technologies (AKTS) has been just drifting along, waiting to find some specific direction. The firm won’t announce its latest earnings until sometime in August and I’m not expecting any great revelations there.

While it has some established customers for its array of RF filters, including defense contractors, it’s still working to develop its client list. Honestly, I’m not expecting its earnings to have taken a major hit in the quarter, but I’m not really expecting them to be up, either.

For now, I wouldn’t worry much about possible effects the pandemic will have on my 5G picks. It will take longer for earnings growth to materialize, but this pandemic will eventually be contained and controlled. When that happens, the 5G revolution will resume.

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