The nationwide rollout of the 5G mobile network three years ago marked a critical moment in telecommunications, ushering in a new era of investment in 5G stocks. This upgrade from 4G LTE to 5G represented a quantum leap in technology, promising download speeds up to 100 times faster. Beyond the buzz of lightning-fast internet, 5G remains a powerful catalyst for cutting-edge advancements across a myriad of sectors from artificial intelligence to autonomous vehicles.
The valuation of the 5G market started at an impressive $5.53 billion in 2020 and is expected to skyrocket to an astounding $667.9 billion by 2026. Factors driving this rapid expansion include the increased adoption of virtual networking architecture and the surge in mobile data traffic. Moreover, the influence of 5G stretches beyond telecommunications, infusing sectors such as healthcare, automotive and manufacturing while promising a future woven with revolutionary technologies.
Here are three top 5G stocks for investors to focus on if they want to take advantage of the expected growth in this sector.
American Tower (AMT)
American Tower (NYSE:AMT) boasts over 225,000 communication sites making it a colossus in the global telecom landscape and critical to the burgeoning 5G sector. As a real estate investment trust (REIT), the company leases tower space to various clients including wireless service providers, broadcasters, public sector organizations and other entities. With it operating under long-term leases of five to 10 years, the firm maintains exceptionally low churn rates, though a lease with T-Mobile (NYSE:TMUS) is currently set to expire in 2025.
Furthermore, in adherence to REIT requirements, it distributes a hefty 90% of its profits as dividends, yielding a healthy 3.2%. The third quarter saw the company outperform expectations, leading to an upward revision of its funds-from-operations per share guidance. Hence, for those eyeing dividends, AMT’s compelling 3% yield and a decade-long history of consistent payout growth make it a standout choice among 5G stocks.
T-Mobile (TMUS)
T-Mobile (NYSE:TMUS) is the third-largest wireless internet carrier in the U.S., dynamically expanding its customer base in its niche briskly. The company’s steadfast focus on adding postpaid wireless customers is paying off, with a clear path towards adding a remarkable 8 million customers by 2025. Notably, T-Mobile’s 5G network deployment advancement places it ahead of its primary competition, solidifying its leadership in the 5G internet rollout. T-Mobile’s board recently pivoted by authorizing a $14 billion share repurchase program, signaling a long-term strategy to buy back $60 billion in stock.
In a strategic turn, TMUS announced its first-ever dividend, which resonated positively with shareholders. The company’s financial performance in the third quarter was impressive, generating a whopping $4 billion in free cash flow (FCF), a massive 50% increase from the same period last year. This surge was attributed to reduced cash outlays for property and equipment and increased cash flow from operations. Additionally, TMUS bolstered its financial health with a rise in net income to $2.1 billion and a boost in net cash to $5.3 billion.
AT&T (T)
In the dynamic landscape of the telecom industry, AT&T (NYSE:T) emerges as a standout contender and is skillfully navigating the 5G market. Its current undervaluation presents a golden opportunity for savvy investors to scoop up the stock at just one times forward sales estimates. Additionally, the company’s strong customer loyalty highlights AT&T’s service excellence and underpins its robust financial health.
Financially, AT&T’s performance is nothing short of impressive. In the third quarter, the company saw a significant uptick in operating margins of 24.9% and an EBITDA margin jump to 43%. It expects its FCF to rise to $16.5 billion for the full year, a $500 million improvement from previous estimates.
Moreover, AT&T’s 468,000 postpaid phone net additions this quarter are a testament to its growing appeal and the effectiveness of its strategies in attracting and retaining customers. AT&T’s current market position, financial performance and growth prospects make it an appealing choice for those looking to invest in 5G stocks.
On the date of publication, Muslim Farooque did not hold (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.
