Adoption of 5G technology has admittedly been slower than many analysts expected with user levels remaining lower than the mainstream 4G and 3G connections around the world. Even so, 5G is the radio frequency technology of choice for US telecom companies with some talks about the next generation of 5G already underway. Moreover, it is still difficult to gauge how much consumer demand will drive the expansion of 5G networks across the world. Regardless, Several 5G stocks could see gains over the next few years as a result of larger corporate infrastructures adopting the technology.
That’s because, rather than focusing on directly providing 5G service and connections, these three companies operate within the margins of the telecom titans. In turn, this provides investors with the opportunity to stake their portfolios on the growth of the industry as a whole. Rather than bet on a single competitor within the sector, savvy investors can purchase shares of the companies that supply the major 5G distributors.
Airgain (AIRG)
Despite a rocky start in 2023, Airgain (NASDAQ:AIRG) stock value has jumped by over 50% in the last six months. This might come as a surprise when looking at the company’s last quarterly earnings report, which saw a 70% increase in losses year-over-year. Though the company has yet to exhibit consistent profitability, a couple of other analysts are recommending it as a buy.
From a product perspective, the company offers serious potential by focusing on the specialized niche of 5G for first responders. One of its more noteworthy products is the AirgainConnect Fleet. This device is an integrated 5G modem and Wi-Fi 6 router, combined with a high-performance antenna and designed for mounting on the roof of any vehicle. The company sells the low-profile, rugged device alongside subscriptions to its proprietary connection management software.
While it may not sound that exciting, the prospect of a company on the forefront of modernizing government connectivity could become lucrative should local governments secure funding to modernize police and fire departments.
Arrow Electronics (ARW)
A colossal contributor to any industry involving electronics, Arrow Electronics (NYSE:ARW) has expanded its distribution network to 5G technologies. Last quarter, the company delivered sales at expectations, with earnings per share remaining at the high end of predictions at $3.56. Arrow was able to achieve this despite a slowdown in electronic components and IT spending markets.
Moreover, even with excess inventory and soft demand throughout the electronics supply chain and a mixed IT spending environment, the company’s full-year 2023 results were solid, per the CEO. Considering that the demand for 5G-related electronics components remains likely to rise, Arrow’s effective management should help steer the company toward growth.
These results allowed Arrow to generate enough cash flow from operations to repurchase approximately $750 million of shares throughout the year. As such, this enables the company to bolster earnings per share for retail and institutional investors.
Ciena (CIEN)
By focusing on custom network solutions, Ciena (NYSE:CIEN) has experienced relative trading stability over the last five years. Though pandemic-era supply chain issues cut into Ciena’s margins, the company has since been on the path to recovery while maintaining a relatively low entry price for investors.
Flying relatively under the 5G industry’s radar, Ciena offers an open network, programmable xHaul router, and network lifecycle automation process. This improves customers’ radio access networks (RAN) and builds a foundation for an agile and seamless 5G network evolution. Considering that novel 5G applications like edge computing and process automation rely on stable network connections to flourish, Ciena’s product appears to be in a strong position.
Furthermore, the stock has been relatively popular among analysts, with the majority assigning it a “buy” rating despite a flatter trend. As far as low-profile 5G stocks go, however, Ciena may have one of the more lucrative addressable markets. Ultimately, it seems like a matter of time before the company has its day in the sun.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.