Investors have been rotating away from expensive tech stocks into stocks from sectors that are well positioned to benefit from the economic recovery. This is evident in the Technology Select Sector SPDR Fund’s (XLK) 1.4% loss over the past three months versus the SPDR S&P 500 ETF Trust’s (SPY) 5.9% returns. However, the general tech pullback has created an opportunity to buy fundamentally strong stocks in the budding 5G space.
Since 5G enables everything from self-driving cars to advances in quantum computing, several 5G stocks are expected to benefit in the coming months from the widespread adoption of this technology. In fact, according to a Brand Essence research report, the global 5G infrastructure market is expected to hit $45 billion by 2025, growing at a 65% CAGR.
Against this backdrop, we think it is wise to bet on Marvell Technology, Inc. (MRVL), Skyworks Solutions, Inc. (SWKS), and Qorvo, Inc. (QRVO) that facilitate 5G connectivity across several sectors. Because these stocks are trading well below their 52-week highs now, it could be wise to bet on them.
Click here to checkout our 5G Industry Report for 2021
Marvell technology, Inc. (MRVL)
Data infrastructure semiconductor company MRVL designs, develops, and sells analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits (ICs). Its compute, security and networking platform solutions, which offer a unique combination of programmability, scalability and performance, gives it an edge over its competitors in the 5G space.
For the fiscal fourth quarter, ended January 31, MRVL’s total revenues were $797.80 million, representing an 11.2% increase from the prior-year quarter. The company’s gross profit increased 38.2% year-over-year to $421.13 million. Its net profit came in at $16.54 million, up 172.2% sequentially. The company’s EPS came in at $0.02, which represents a 166.7% sequential rise.
MRVL’s EPS is expected to increase 50% from the prior-year quarter to $0.27 for the about-to-be-reported quarter, ended April 30. Analysts expect its annual revenues to be $4.16 billion in its fiscal year 2022, which represents a 40.2% year-over-year increase.
The company completed the acquisition of Inphi Corporation last month and, as a result, a semiconductor powerhouse is expected to be created. MRVL’s President and CEO Matt Murphy said, “Together we will have the portfolio, capabilities, and scale to expand Marvell’s leadership in its key growth end markets of 5G, Cloud and Automotive.” The stock has rallied 62.5% over the past year. It is currently trading 23.1% below its $55.70 52-week high, which it hit on January 20.
MRVL’s POWR Ratings reflects this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MRVL has a B grade for Growth. In addition to these grades, one can see MRVL’s ratings for Stability, Sentiment, Value, Quality and Momentum here.
MRVL is ranked #81 of 98 stocks in the B-rated Semiconductor & Wireless Chip industry.
Skyworks Solutions, Inc. (SWKS)
SWKS designs, develops, manufactures and markets semiconductor products and intellectual property. Its product portfolio includes amplifiers, antenna tuners, attenuators, and circulators/isolators, among others. The company is also at the forefront of the 5G revolution, leveraging its SKY5 unifying platform to bring forward innovative solutions in the 5G space.
The company’s revenue for the second quarter, ended April 2, 2021, came in at $1.20 billion, which represents a 53% year-over-year rise. SWKS’ gross profit was $578.40 million, up 54% year-over-year. Its net income for the quarter came in at $325 million, which represents a 79.5% rise from the same period last year. Its EPS increased 84.1% year-over-year to $1.97.
Analysts expect SWKS EPS to increase 71.2% year-over-year to $2.14 for the quarter ending June 30. It surpassed consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to be $1.22 billion for the quarter ending September 30, 2021, which represents a 27.6% year-over-year increase.
SWKS entered an agreement with Silicon Laboratories, Inc. (SLAB) in April, under which SWKS will acquire SLAB’s Infrastructure & Automotive business. This is expected to expand the company’s capabilities across high-growth end markets, including automotive, 5G wireless infrastructure, communications and industrial. The stock has surged 54.6% over the past year to close yesterday’s trading session at $164.16. It is currently trading 19.5% below its 52-week high of $204.
SWKS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It also has a B grade for Quality. Click here to see the additional POWR Ratings for SWKS (Sentiment, Value, Growth, Momentum and Stability).
SWKS is ranked #22 in the same industry.
Qorvo, Inc. (QRVO)
QRVO develops and markets a wide range of radio frequency (RF) technologies for the mobile, infrastructure, defense/aerospace and Internet of Things (IoT) markets. The company operates through two segments: Mobile Products (MP), and Infrastructure and Defense Products (IDP).
The company’s revenue for its fiscal fourth quarter, ended April 3, came in at $1.10 billion, which represents a 36.2% year-over-year increase. Its gross profit increased 57.8% from the same period last year to $528.50 million. QRVO’s net income increased 492.7% year-over-year to $298.70 million. And its EPS came in at $2.60, up 504.7% year-over-year.
For the current quarter, ending June 30, analysts expect QRVO’s EPS to come in at $2.46, which represents an increase of 64% from prior-year-quarter. It also surpassed consensus EPS estimates in each of the trailing four quarters. Its annual revenue is expected to increase 15.4% year-over-year to $4.63 billion in its fiscal year 2022.
On May 6, QRVO completed the acquisition of Mountain View, California-based NextInput, which is a pioneer in the emerging field of force-sensing solutions for human-machine interface. The acquisition is expected to expand QRVO’s technology portfolio and enable it to accelerate the deployment of force-sensing solutions utilizing MEMS-based sensors. The stock has gained 80.6% over the past year to close yesterday’s trading session at $171.08. It is currently trading 15.2% below its $201.68 52-week high, which it hit on April 29, 2021.
It’s no surprise that QRVO has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Growth and Sentiment. Click here to see QRVO’s ratings for Momentum, Value and Stability.
QRVO is ranked #19 in the same industry.
Click here to checkout our 5G Industry Report for 2021
MRVL shares were trading at $42.84 per share on Tuesday afternoon, up $0.03 (+0.07%). Year-to-date, MRVL has declined -9.78%, versus a 11.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More…
