For nearly 5 years now, 5G wireless has been creeping into our network systems. Not even the corona pandemic scare could derail the expansion of the new networks – the perceived advantages are too many, too deep, to deny. For the average customer, 5G will bring far faster mobile download times, far lower latency, and consequent higher performance from wireless devices. For the tech world, 5G will enable the full exploitation of new advances in automation, mechanization, and remote operations. From autonomous vehicles to IoT to remote surgeries, 5G promises to revolutionize the way we interact with the world through digital media.
It’s not an easy ride, though. 2022 promises to see an explosion in 5G networks, but the expansion will require a world of hard work. 5G may be a major advance over older wireless tech, but the advance comes at a cost. The cells are shorter ranged, and full coverage will require a denser tower network by an order of magnitude.
That buildout, as it happens, will bring plenty of opportunities to investors. From the companies that put up the towers to those that provide the hardware to those that offer the networking service – and with the overlap among those, and other, categories – investors will have no shortage of stocks that stand to benefit from 5G’s increasing momentum.
Using the data tools from TipRanks, we’ve pulled up the details on two stocks that are well positioned to gain from 5G’s expansion in the coming year. Let’s dive in, and add some commentary from the Wall Street analysts for color.
T-Mobile US (TMUS)
First up is T-Mobile, the second-largest wireless service provider in the US. The company boasts over 106 million subscribers – almost one-third of the total US population – as of the third quarter 2021. T-Mobile also operates the largest 5G wireless network in the US, with its ultra-capacity 5G service covering over 200 million people in the US. The company reached this coverage milestone in November of last year, a few ahead of its schedule.
The ultra-capacity network is only part of T-Mobile’s 5G service. It’s the high end, offering access to mid-band and mmWave networks; at the lower end, T-Mobile’s 5G Extended Range network has reached out to cover approximately 308 million people – that is, that many people are within range to access the company’s service. No other wireless provider in the US can match this range of coverage. Even though T-Mobile is the second largest provider by total subscribers, it’s 5G reach puts it in a commanding position relative to its peers in the field.
This isn’t to say that T-Mobile doesn’t face headwinds. Last year, the company acquired Sprint as sole owner. It cemented its size status by combining its own and Sprint’s customer bases and networks, and even owns more mid-band radio spectrum that its main challengers, AT&T and Verizon. While that radio spectrum ownership gives T-Mobile a head start in expanding 5G coverage, the company is still having teething troubles integrating Sprint’s service and customers. While the Sprint brand has been phased out, existing Spring customers still have Sprint SIM cards.
More recently, and perhaps more seriously, T-Mobile faced a data breach this past summer. In August of 2021, some 54 million customers found their account data potentially compromised. While T-Mobile has moved to close the breach, the company’s stock fell and has still not rebounded. The shares are down 12% in the last 12 months.
Even though shares have slipped, revenues have held steady. For the five quarters from 3Q20 to 3Q21, the top line stayed between $19.3 billion and $20.3 billion. Earnings came in at $6.8 billion, a company record, although the earnings-per-share is down this year, to 55-cents. The company’s free cash flow expanded 4x in 2021, to $1.6 billion, for industry-leading growth.
In coverage for Benchmark, analyst Matthew Harrigan sees T-Mobile’s lead in 5G as the key point to focus on. He writes, “[The] positive long-term thesis remains that T-Mobile can leverage its 5G advantages to realize its 5-year ambitions for achieving near 20% share in smaller and rural markets and corporate liable lines. This implies that T-Mobile need only generate ~2.5% annual urban market customer growth through 2026, likely achievable in our view despite heavy AT&T and Verizon promotional activity…”
These comments support a Buy rating on the stock, while Harrigan’s $200 price target implies a robust upside of ~73% for the next 12 months. (To watch Harrigan’s track record, click here)
Overall, the Strong Buy consensus rating shows that Wall Street generally agrees with the Benchmark take here. TMUS has 13 reviews on line, including 12 Buys and 1 Hold. The shares are priced at $115.91 and their $162.85 average price target suggests a one-year upside potential of ~41%. (See TMUS stock analysis on TipRanks)
Dish Network (DISH)
The second stock we’ll look at is Dish Network. Dish started out from its Colorado base as a direct TV company, offering satellite broadcasts direct to customers, and has since expanded its service to include prepaid wireless service. To that end, the company in 2019 acquired Sprint’s Boost Mobile prepaid wireless network. That acquisition was part of the general agreements around the T-Mobile/Sprint merger, and cost Dish $1.4 billion.
The Boost purchase also made Dish the country’s fourth largest wireless provider – albeit a distant fourth place, with only 8.9 million subscribers, far behind the three giants of Verizon, T-Mobile, and AT&T. Dish has the advantage of being able to piggy-back on a larger carrier; its wireless customers currently have access through T-Mobile’s network.
And this, also, brings consequences. Dish has been able to focus on developing its own 5G wireless network, with plans to have the first standalone 5G-only network in the US by mid-2023, capable of reaching 70% of the US population. It’s an ambitious plan, made feasible by Dish’s connection with the larger T-Mobile – but more importantly, by a smart strategic partnership with Amazon Web Services (AWS) to create a cloud-based Open Radio Access Network (O-RAN) for 5G operations.
In other moves related to its own 5G buildout, Dish has entered an agreement with Spirent Communications for autonomous testing of the 5G network core for performance validation. The agreement will allow Dish to continue building while confident that the infrastructure is functional. And on the customer-facing end, Dish’s Boost Mobile brand has released the Celero5G, a wireless smartphone device optimized for both prepaid networking and 5G. In the words of one reviewer, the device will ‘bring 5G to the prepaid crowd.’
Even though Dish has a clear path forward, its recent financial results have been mixed. In 3Q21, the company reported EPS of 88 cents, just below the 89-cent forecast – although it was up yoy by a modest 2%. Revenue showed the opposite pattern; at $4.45 billion is slipped almost 2% from the prior year quarter but just edged over the market expectation.
DISH shares fell sharply after the report, losing 13%. In a note for Pivotal Research, 5-star analyst Jeffrey Wlodarczak describes that slip as ‘head scratching.’ In his view, Dish has too many positives going for it to justify the share drop: “We do not believe the DISH investment thesis is rocket science as we believe market launches are likely to inevitably lead to major enterprise test relationships (with potential partner companies such as AMZN, WMT, TGT to name just a few) and clearly AWS has a vested interest in ensuring the success of DISH’s innovative network architecture. When these market tests are announced over the next 6 months it should give investors much greater conviction regarding the uniqueness of the DISH wireless offering, the significant financial upside associated with the network and boost the stock materially.”
In line with these comments, Wlodarczak rates DISH a Buy, and his $65 price target implies ~97% gain in 2022. (To watch Wlodarczak’s track record, click here)
There’s a broad agreement on Wall Street about a bullish future for Dish. The stock’s 7 reviews break down to 5 Buys, along with 1 each Hold and Sell, for a Strong Buy consensus. Shares are currently trading for $33.01 and have an average target of $53.57, for ~62% one-year upside. (See DISH stock analysis on TipRanks)
To find good ideas for 5G stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.