Amid the ongoing rapid digitalization, consistent advancements in technologies such as 5G has become crucial. With the omicron variant of the coronavirus having been identified in at least 17 U.S. states, the demand for 5G technologies is only expected to surge owing to the continued hybrid work culture. Investors’ interest in the sector is evident from the Defiance 5G Next Gen Connectivity ETF’s (FIVG) 2.9% gains over the past three months and 18.9% year-to-date returns.
The ease of operating wireless 5G supported devices with high and uninterrupted speed drives the overwhelming demand. According to a Report Ocean report, the global 5G technology market is expected to grow more than 49.1% during 2018-2025.
Given this backdrop, fundamentally sound 5G stocks NXP Semiconductors N.V. (NXPI), Qorvo, Inc. (QRVO), and Rambus Inc. (RMBS) could be solid picks now.
NXP Semiconductors N.V. (NXPI)
Headquartered in Eindhoven, the Netherlands, NXPI offers various semiconductor products. The company’s segments include High Performance Mixed Signal (HPMS), Standard Products (SP), Corporate, and Other. Also, its product portfolio comprises Wi-Fi, and Wi-Fi/Bluetooth integrated SoCs, analog, and interface.
On November 10, NXPI announced a collaboration with the Ford Motor Company (F) to deliver enhanced driver experiences, convenience, and services across its global fleet of vehicles. Kurt Sievers, the CEO of NXPI, said, “NXP is helping Ford push the boundaries of what we all expect from a car by providing engaging in-car user experiences and over-the-air updates that continuously improve a vehicle beyond the date it drives off the lot.”
NXPI’s revenue increased 26.2% year-over-year to $2.86 billion for the fiscal third quarter ended October 3, 2021. Its non-GAAP operating income increased 63.7% year-over-year to $959 million, while its adjusted EBITDA increased 51.9% year-over-year to $1.11 billion.
Analysts expect NXPI’s revenue to increase 28% year-over-year to $11.03 billion in fiscal 2021. Its EPS is expected to grow 73.2% year-over-year to $10.62 in the current year. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 43% to close Friday’s trading session at $227.12.
NXPI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NXPI has an A grade for Momentum and a B grade for Growth, Value, Quality, and Sentiment. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #17 of 100 stocks. Click here to see NXPI’s rating for Value as well.
Qorvo, Inc. (QRVO)
QRVO develops and commercializes technologies and products for wireless and wired connectivity worldwide. The company operates through two segments: Mobile Products and Infrastructure and Defense Products.
On November 3, 2021, QRVO announced that it had acquired Princeton, New Jersey-based United Silicon Carbide (UnitedSiC). Philip Chesley, the president of Qorvo IDP, said, “The addition of United Silicon Carbide to our IDP business significantly expands our market opportunities in high-power applications. This acquisition enables Qorvo to deliver high-value, best-in-class intelligent power solutions covering power conversion, motion control, and circuit protection applications.”
QRVO’s non-GAAP revenue increased 13% sequentially to $1.26 billion for the fiscal second quarter ended October 2, 2021. The company’s non-GAAP net income came in at $384.50 million, up 19.2% sequentially. Also, its non-GAAP EPS increased 20.8% sequentially to $3.42.
For fiscal 2022, analysts expect QRVO’s revenue to grow 15% year-over-year to $4.62 billion. In addition, the company’s EPS is expected to increase 22.1% year-over-year to $11.89 in the current year. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 5.4% since hitting its 52-week low of $142.17 on December 2, 2021, to close Friday’s trading session at $149.91.
QRVO’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
In addition, it has an A grade for Quality and a B grade for Value. It is ranked #30 in the same industry. Click here to see the additional POWR Ratings for QRVO (Growth, Sentiment, Momentum, and Stability).
Rambus Inc. (RMBS)
Operating for more than three decades, RMBS provides chips and intellectual property (IP) that enable performance improvements for data centers and other markets. The company’s offerings include DDR5, DDR4, and DDR3 memory interface chips. Also, it offers a portfolio of physical interface and companion digital controllers through Northwest Logic, Inc.
On September 21, RMBS announced extending its patent license agreement with Kioxia Corporation. Kit Rodgers, the company’s senior vice president of technology partnerships and corporate development, said, “The Rambus patent portfolio covers foundational technologies for the semiconductor industry, including the flash memory segment, that help improve the performance of the most advanced systems.”
RMBS’ total revenue for the fiscal third quarter ended September 30, 2021, was $81.28 million, up 42.8% year-over-year. Its gross profit increased 50.9% year-over-year to $62.86 million. Also, its net income came in at $3.68 million compared to a loss of $12.74 million in the year-ago period.
Analysts expect RMBS’ revenue to increase 12.6% year-over-year to $505.48 million in fiscal 2022. Its EPS is expected to be $1.35 in the current year, up 9.8% year-over-year. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 64.4% to close yesterday’s trading session at $27.11.
It’s no surprise that RMBS has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Growth and a B grade for Quality.
RMBS is ranked #41 in the same industry. In addition to the POWR Ratings I’ve just highlighted, we’ve also rated the stock for Value, Momentum, Stability, and Sentiment. Click here to get all the RMBS ratings.
NXPI shares were unchanged in after-hours trading Monday. Year-to-date, NXPI has gained 42.24%, versus a 23.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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