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3 Radio Frequency Stocks to Tap on Increasing Demand for 5G
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The Zacks Semiconductors - Radio Frequency industry is riding on rapid deployment of 5G networking, which is responsible for the proliferation of Internet of Things (IoT), Advanced Driver Assistance Systems (ADAS) and Augmented Reality/Virtual Reality (AR/VR) devices.
Democratization of 5G smartphones is a tailwind for the industry players. This has bolstered demand for RF semiconductor products, which enhances the prospects of prominent industry players like Skyworks (SWKS - Free Report) , Qorvo (QRVO - Free Report) and Akoustis Technologies (AKTS - Free Report) .
Nevertheless, lingering impacts of the coronavirus pandemic-led business volatility remain a concern.
Industry Description
The Zacks Semiconductors - Radio Frequency Industry comprises companies that provide Radio Frequency (RF) solutions, Front-end Modules (FEMs), low-noise amplifiers, diodes, multi-chip modules (MMICs), optical components, surface acoustic wave (SAW), bulk acoustic wave (BAW) technology-based antenna-plexers, and film bulk acoustic resonator (FBAR) filters to enable smartphone devices function more efficiently in congested RF spectrum. They serve a wide array of industries with their solutions finding ample application in 5G and smartphone equipment, aerospace and defense, optical networks, cellular base stations, automotive and smart home applications. Most of these companies utilize robust wafer fabrication technologies as well as ZigBee, Bluetooth Low Energy (BLE), Thread, silicon germanium and Gallium Nitride (GaN) technologies to stay ahead of competition.
4 Trends Influencing the Prospects of the Semiconductors - RF Industry
Accelerated Deployment of 5G is a Tailwind: Rapid implementation of 5G networking infrastructure and robust adoption of cloud computing applications hold promise considering the wireless communication market. Coronavirus crisis-induced work-from-home wave has necessitated the need for higher bandwidth and triggered LTE advancements, which are expected to bolster demand for RF power amplifiers. Increasing RF content in latest 5G smartphones is a key catalyst. For instance, the roll out of Apple’s (AAPL - Free Report) full 5G iPhone 12 line up is anticipated to benefit the top-line performance of both Qorvo and Skyworks at least in the near term. Notably, both the companies derive significant revenues from Apple, which is poised to gain from the incremental adoption of its latest iPhones.
Rebound in Smartphone Market Favors Growth Prospects: Demand recovery in the smartphone market is likely to aid prospects of major industry players, including Qorvo, Skyworks, Akoustis and RF Industries (RFIL - Free Report) . 5G smartphone shipments are projected to account for more than 40% of global volume in 2021 and to subsequently grow to 69% in 2025. IDC estimates that growing competition in the 5G Android domain, specifically from Chinese vendors is anticipated to result in aggressively priced 5G smartphones. This is expected to accelerate the democratization of 5G smartphones and boost prospects of the industry players.
Innovation is Opening New Business Avenues: Easing shelter-in-place guidelines, as economies started to reopen, has led to growing clout of contact tracing applications in Ultra-Wideband (UWB) technology-based wearable devices. Increase in production ramp of such wearables is opening up new opportunities for industry participants. Rapid proliferation of IoT, wearables, drones, VR/AR devices, autonomous cars, and ADAS is expected to drive demand for RF semiconductor products beyond smartphone devices, which favors industry prospects. Notably, RF Semiconductors are setting the pace for technology modernization, consequently digitizing aspects like connectivity, healthcare, transport, defense, among others. For instance, Qorvo is gaining from rapid adoption of GaN for high-power defense applications and emerging healthcare applications. Diversified utilization of RF Semiconductor products bodes well for the industry players. Moreover, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm and 3 nm technology is anticipated to bolster the industry’s prospects. Further, the roll out of new bands and band combinations has led to considerable design challenges for OEM smartphone manufacturers. The industry participants, like Qorvo, are looking to address these challenges with a robust range of antenna-plexers portfolio utilizing BAW technology.
Coronavirus Crisis Induced Macroeconomic Weakness to Hinder Prospects: The industry players are reeling under the impact of the coronavirus crisis-induced macroeconomic woes. The COVID-19 crisis led imposition of lockdowns had previously compelled semiconductor companies to shut down production facilities temporarily. The business impacts stemming from supply chain disruptions due to social distancing and shelter-in-place restrictions raises concerns regarding the industry’s prospects amid increasing infected cases. Although vaccination efforts have triggered gradual reopening of economies in several parts of the world, production delays remain an overhang. Moreover, the U.S.-China trade war induced tariffs and Huawei ban have been hindering growth of the industry participants for quite some time now. Markedly, the industry players generate significant portion of their revenues from China.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Zacks Semiconductors - Radio Frequency Industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #111, which places it at the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. While the industry’s earnings estimate for 2021 has moved up 45.8% since Aug 31, 2020, the same for 2022 has improved 20.7%.
Before we present a few stocks, that you may want to add to your portfolio, given the bright prospects, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Zacks Semiconductors - Radio Frequency Industry has underperformed the S&P 500 and its own sector over the past year.
One Year Price Performance
The industry has gained 25.8% over this period compared with the S&P 500’s and broader sector’s rally of 35.3% and 40.9%, respectively.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings ratio (P/E), which is a commonly used multiple for valuing Semiconductors - Radio Frequency stocks, the industry is currently trading at 18.30X, lower than the S&P 500’s 21.59X and the sector’s 23.59X.
Over the past five years, the industry has traded as high as 24.12X and as low as 10.01X, with the median being at 13.82X, as the charts below show.
Forward 12-Month P/E Ratio
3 Radio Frequency Stocks to Keep a Close Eye on
Skyworks: Skyworks is benefiting from increasing demand for 5G handsets. The Irvine, CA-based company’s Sky5 product portfolio facilitated several 5G smartphone launches, and its offerings have been selected by smartphone makers like Google, Samsung, VIVO, Xiaomi and other Tier-1 players.
This Zacks Rank #2 (Buy) company’s diversified portfolio positions it well to capitalize on momentum witnessed across telemedicine, emergency response applications and remote work, online learning, and video streaming triggered by the coronavirus crisis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Skyworks’ shares have appreciated 28.9% in the past year. The Zacks Consensus Estimate for its fiscal 2021 earnings has inched up 0.3% to $10.33 per share over the past 30 days, indicating year-over-year growth of 68.5%.
Price and Consensus: SWKS
Qorvo: Qorvo, currently carrying a Zacks Rank #3 (Hold), is riding on gains from increased demand for 5G handsets and robust improvement in the Infrastructure and Defense Products business.
Strength in smartphone vertical, upgrades in 5G smartphones, and gains from consistent growth in 5G infrastructure, power management, and defense end-markets is anticipated to drive financial performance.
The roll-out of Wi-Fi 6 and 6E technologies, and growing clout of precision location applications based on UWB technology are favoring the company’s prospects.
Solid uptake of BAW antenna-plexers is expected to boost top-line growth. Expanding portfolio of 5G base solutions amid accelerated deployment of 5G bodes well. Besides, growing momentum for Qorvo’s GaN technology-based solutions is a positive.
Shares of Qorvo have soared 46.5% in the past year. The Zacks Consensus Estimate for for the Greensboro, NC-based company’s fiscal 2022 earnings has stayed at $11.47 per share over 30 days, indicating year-over-year growth of 14.7%.
Price and Consensus: QRVO
Akoustis Technologies: This Huntersville, NC-based company is riding on solid demand for its XBAW filters. In third-quarter fiscal 2021, XBAW filter unit shipments increased more than 100% sequentially. The company introduced 5.6 GHz and 6.6 GHz WiFi 6E coexistence filter modules in the fiscal third quarter. Akoustis plans to increase the annual production capacity at its New York fab by the end of calendar year 2021 to approximately 500 million filters per year to address the growing demand.
Akoustis’ shares are up 20.8% in the past year. The Zacks Consensus Estimate for its fiscal 2021 bottom line is pegged at a loss of 75 cents per share, unchanged over the past month. The company had reported net loss of 86 cents in 2020.
Price and Consensus: AKTS
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3 Radio Frequency Stocks to Tap on Increasing Demand for 5G
The Zacks Semiconductors - Radio Frequency industry is riding on rapid deployment of 5G networking, which is responsible for the proliferation of Internet of Things (IoT), Advanced Driver Assistance Systems (ADAS) and Augmented Reality/Virtual Reality (AR/VR) devices.
Democratization of 5G smartphones is a tailwind for the industry players. This has bolstered demand for RF semiconductor products, which enhances the prospects of prominent industry players like Skyworks (SWKS - Free Report) , Qorvo (QRVO - Free Report) and Akoustis Technologies (AKTS - Free Report) .
Nevertheless, lingering impacts of the coronavirus pandemic-led business volatility remain a concern.
Industry Description
The Zacks Semiconductors - Radio Frequency Industry comprises companies that provide Radio Frequency (RF) solutions, Front-end Modules (FEMs), low-noise amplifiers, diodes, multi-chip modules (MMICs), optical components, surface acoustic wave (SAW), bulk acoustic wave (BAW) technology-based antenna-plexers, and film bulk acoustic resonator (FBAR) filters to enable smartphone devices function more efficiently in congested RF spectrum. They serve a wide array of industries with their solutions finding ample application in 5G and smartphone equipment, aerospace and defense, optical networks, cellular base stations, automotive and smart home applications. Most of these companies utilize robust wafer fabrication technologies as well as ZigBee, Bluetooth Low Energy (BLE), Thread, silicon germanium and Gallium Nitride (GaN) technologies to stay ahead of competition.
4 Trends Influencing the Prospects of the Semiconductors - RF Industry
Accelerated Deployment of 5G is a Tailwind: Rapid implementation of 5G networking infrastructure and robust adoption of cloud computing applications hold promise considering the wireless communication market. Coronavirus crisis-induced work-from-home wave has necessitated the need for higher bandwidth and triggered LTE advancements, which are expected to bolster demand for RF power amplifiers. Increasing RF content in latest 5G smartphones is a key catalyst. For instance, the roll out of Apple’s (AAPL - Free Report) full 5G iPhone 12 line up is anticipated to benefit the top-line performance of both Qorvo and Skyworks at least in the near term. Notably, both the companies derive significant revenues from Apple, which is poised to gain from the incremental adoption of its latest iPhones.
Rebound in Smartphone Market Favors Growth Prospects: Demand recovery in the smartphone market is likely to aid prospects of major industry players, including Qorvo, Skyworks, Akoustis and RF Industries (RFIL - Free Report) . 5G smartphone shipments are projected to account for more than 40% of global volume in 2021 and to subsequently grow to 69% in 2025. IDC estimates that growing competition in the 5G Android domain, specifically from Chinese vendors is anticipated to result in aggressively priced 5G smartphones. This is expected to accelerate the democratization of 5G smartphones and boost prospects of the industry players.
Innovation is Opening New Business Avenues: Easing shelter-in-place guidelines, as economies started to reopen, has led to growing clout of contact tracing applications in Ultra-Wideband (UWB) technology-based wearable devices. Increase in production ramp of such wearables is opening up new opportunities for industry participants. Rapid proliferation of IoT, wearables, drones, VR/AR devices, autonomous cars, and ADAS is expected to drive demand for RF semiconductor products beyond smartphone devices, which favors industry prospects. Notably, RF Semiconductors are setting the pace for technology modernization, consequently digitizing aspects like connectivity, healthcare, transport, defense, among others. For instance, Qorvo is gaining from rapid adoption of GaN for high-power defense applications and emerging healthcare applications. Diversified utilization of RF Semiconductor products bodes well for the industry players. Moreover, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm and 3 nm technology is anticipated to bolster the industry’s prospects. Further, the roll out of new bands and band combinations has led to considerable design challenges for OEM smartphone manufacturers. The industry participants, like Qorvo, are looking to address these challenges with a robust range of antenna-plexers portfolio utilizing BAW technology.
Coronavirus Crisis Induced Macroeconomic Weakness to Hinder Prospects: The industry players are reeling under the impact of the coronavirus crisis-induced macroeconomic woes. The COVID-19 crisis led imposition of lockdowns had previously compelled semiconductor companies to shut down production facilities temporarily. The business impacts stemming from supply chain disruptions due to social distancing and shelter-in-place restrictions raises concerns regarding the industry’s prospects amid increasing infected cases. Although vaccination efforts have triggered gradual reopening of economies in several parts of the world, production delays remain an overhang. Moreover, the U.S.-China trade war induced tariffs and Huawei ban have been hindering growth of the industry participants for quite some time now. Markedly, the industry players generate significant portion of their revenues from China.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Zacks Semiconductors - Radio Frequency Industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #111, which places it at the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. While the industry’s earnings estimate for 2021 has moved up 45.8% since Aug 31, 2020, the same for 2022 has improved 20.7%.
Before we present a few stocks, that you may want to add to your portfolio, given the bright prospects, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags S&P 500 & Sector
The Zacks Semiconductors - Radio Frequency Industry has underperformed the S&P 500 and its own sector over the past year.
One Year Price Performance
The industry has gained 25.8% over this period compared with the S&P 500’s and broader sector’s rally of 35.3% and 40.9%, respectively.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings ratio (P/E), which is a commonly used multiple for valuing Semiconductors - Radio Frequency stocks, the industry is currently trading at 18.30X, lower than the S&P 500’s 21.59X and the sector’s 23.59X.
Over the past five years, the industry has traded as high as 24.12X and as low as 10.01X, with the median being at 13.82X, as the charts below show.
Forward 12-Month P/E Ratio
3 Radio Frequency Stocks to Keep a Close Eye on
Skyworks: Skyworks is benefiting from increasing demand for 5G handsets. The Irvine, CA-based company’s Sky5 product portfolio facilitated several 5G smartphone launches, and its offerings have been selected by smartphone makers like Google, Samsung, VIVO, Xiaomi and other Tier-1 players.
This Zacks Rank #2 (Buy) company’s diversified portfolio positions it well to capitalize on momentum witnessed across telemedicine, emergency response applications and remote work, online learning, and video streaming triggered by the coronavirus crisis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Skyworks’ shares have appreciated 28.9% in the past year. The Zacks Consensus Estimate for its fiscal 2021 earnings has inched up 0.3% to $10.33 per share over the past 30 days, indicating year-over-year growth of 68.5%.
Price and Consensus: SWKS
Qorvo: Qorvo, currently carrying a Zacks Rank #3 (Hold), is riding on gains from increased demand for 5G handsets and robust improvement in the Infrastructure and Defense Products business.
Strength in smartphone vertical, upgrades in 5G smartphones, and gains from consistent growth in 5G infrastructure, power management, and defense end-markets is anticipated to drive financial performance.
The roll-out of Wi-Fi 6 and 6E technologies, and growing clout of precision location applications based on UWB technology are favoring the company’s prospects.
Solid uptake of BAW antenna-plexers is expected to boost top-line growth. Expanding portfolio of 5G base solutions amid accelerated deployment of 5G bodes well. Besides, growing momentum for Qorvo’s GaN technology-based solutions is a positive.
Shares of Qorvo have soared 46.5% in the past year. The Zacks Consensus Estimate for for the Greensboro, NC-based company’s fiscal 2022 earnings has stayed at $11.47 per share over 30 days, indicating year-over-year growth of 14.7%.
Price and Consensus: QRVO
Akoustis Technologies: This Huntersville, NC-based company is riding on solid demand for its XBAW filters. In third-quarter fiscal 2021, XBAW filter unit shipments increased more than 100% sequentially. The company introduced 5.6 GHz and 6.6 GHz WiFi 6E coexistence filter modules in the fiscal third quarter. Akoustis plans to increase the annual production capacity at its New York fab by the end of calendar year 2021 to approximately 500 million filters per year to address the growing demand.
Akoustis’ shares are up 20.8% in the past year. The Zacks Consensus Estimate for its fiscal 2021 bottom line is pegged at a loss of 75 cents per share, unchanged over the past month. The company had reported net loss of 86 cents in 2020.
Price and Consensus: AKTS