Communication technology is expected to improve significantly with the rising deployment of the 5G technology. Compared to 4G, 5G comes with higher bandwidth, better data rates, and improved scalability, which would easily accommodate more devices in the Internet of Things (IoT).
According to CCS Insight, global 5G connections are expected to reach 1.20 billion in 2022, with analysts predicting widespread availability of 5G-capable smartphones and refinement of operator strategies.
The rising need for high-speed internet also raises the demand for sophisticated 5G infrastructure. The global 5G chipset market is expected to reach $145.29 billion by 2030, growing at a CAGR of 66.3%.
Given the favorable prospects of the 5G market, fundamentally strong stocks Micron Technology, Inc. (MU), Cirrus Logic, Inc. (CRUS), and Broadcom Inc. (AVGO) could be solid investments now.
Micron Technology, Inc. (MU)
MU engages in the design, manufacture, and sale of memory and storage products internationally. The company operates through Compute and Networking Business Unit; Mobile Business Unit; Storage Business Unit; and Embedded Business Unit segments.
In May, MU announced the upcoming availability of two new consumer storage products, the Crucial P3 Plus Gen4 NVMe and Crucial P3 NVMe solid-state drives (SSDs). The new products are expected to expand the company’s NVMe SSD product portfolio.
In April, MU announced the volume production of its new 16Gb GDDR6X memory for providing sharp visuals in memory-intensive applications like gaming and content creation.
Mark Montierth, vice president and general manager of High-Performance Memory and Networking at MU, said, “Micron is once again at the forefront of the memory innovation powering today’s highest bandwidth solutions and built with the advanced process and interface technology to enable continued graphics performance leadership.”
In the fiscal second quarter ended March 3, 2022, MU’s revenue increased 24.9% year-over-year to $7.79 billion. Its non-GAAP operating income grew 118.8% from the prior-year quarter to $2.75 billion, while the non-GAAP net income stood at $2.44 billion, indicating an increase of 116.7% from the prior-year quarter. The company’s non-GAAP EPS increased 118.4% from its year-ago value to $2.14.
Analysts expect MU’s revenue for the third quarter (ended May 2022) to come in at $8.69 billion, indicating a 17.2% year-over-year growth. The company’s EPS for the same quarter is expected to increase 31.4% from the prior-year period to $2.47.
Moreover, MU has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters. The stock has lost 19.1% over the past month.
MU’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MU is rated an A in Value and a B in Growth and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #12 of 96 stocks. To see additional POWR Ratings for Sentiment, Stability, and Momentum for MU, click here.
Cirrus Logic, Inc. (CRUS)
CRUS operates as a fabless semiconductor company that offers low-power and high-precision mixed-signal processing solutions globally. The company’s portfolio includes portable products, including codecs components, digital signal processors, and SoundClear technology.
For the fourth quarter ended March 26, CRUS’ net sales increased 66.9% year-over-year to $489.97 million. Its non-GAAP gross profit rose 74.5% from the same period last year to $258.99 million. The company’s non-GAAP net income increased 196.3% year-over-year to $117.71 million, while its non-GAAP EPS grew 204.5% from the prior-year quarter to $2.01.
Analysts expect CRUS’ revenue to grow 32.9% year-over-year to $368.53 million for the first quarter (ending June 2022). Street expects its EPS to increase 55.8% from the prior-year quarter to $0.84 for the same quarter. Additionally, CRUS has topped consensus EPS estimates in each of the trailing four quarters, which is impressive. The stock has declined 10.8% over the past month.
CRUS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
CRUS has an A grade for Growth and a B for Value, Sentiment, and Quality. In the Semiconductor & Wireless Chip industry, it is ranked #1. Click here to see the additional POWR Ratings for CRUS (Stability and Momentum).
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices, which include mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. The company operates in two broad segments: Semiconductor Solutions and Infrastructure Software.
On May 26, AVGO and enterprise software company VMware Inc. (VMW) announced an agreement to acquire VMW’s outstanding shares by AVGO in a cash and stock transaction valued at approximately $61 billion. The acquisition should enhance AVGO’s operative capacity and help serve customers more effectively and securely.
Earlier in the same month, AVGO announced the delivery of its high bandwidth monolithic automotive Ethernet switch device. The device, designed to address the growing bandwidth need for in-vehicle networking applications and facilitate the adoption of software-defined vehicles (SDV), is expected to add to the company’s revenue stream.
AVGO’s net revenue increased 22.6% year-over-year to $8.10 billion in the fiscal second quarter ended May 1. Its non-GAAP net income improved 34.2% year-over-year to $4.00 billion. The company’s non-GAAP EPS increased 37% from its year-ago value to $9.07.
The consensus EPS estimate of $9.53 for the third quarter (ending July 2022) represents a 36.9% improvement year-over-year. The consensus revenue estimate of $8.39 billion for the same quarter reflects a 23.8% increase from the same period the last year. The company has surpassed the consensus EPS estimates in all of the trailing four quarters. The stock has lost 8.2% over the past month.
AVGO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to Strong Buy in our POWR Rating system.
AVGO is rated an A for Growth and Quality and a B for Sentiment. Within the Semiconductor & Wireless Chip industry, it is ranked #9. Click here to see additional POWR Ratings for Value, Momentum, and Stability for AVGO.
MU shares rose $1.40 (+2.51%) in premarket trading Tuesday. Year-to-date, MU has declined -40.07%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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