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4 Stocks to Watch as Demand for Smartphones Makes a Comeback

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When the coronavirus broke out last year, people cut back on discretionary spending, thereby affecting the demand for smartphones. But in 2021, factors like pent-up demand and improvement in the situation across major economies on the wide availability of vaccines, a turnaround is being noticed in smartphone sales. Per a report by Canalys, in the second quarter of 2021, global smartphone shipments grew 12%.

In fact, growth in the second quarter follows an impressive growth in the first quarter of 2021 as well with Gartner stating in a report that worldwide smartphone sales increased 26% in the first quarter. Anshul Gupta, the senior research director at Gartner, stated in the report that along with other factors, “sustained learning and working from home,” also helped in bolstering the sales of smartphones in the first quarter.

The rising popularity of 5G technology around the world is also providing a leg up to the demand for smartphones. This is because 5G offers several benefits compared to its 4G counterpart, like higher data transfer speeds, lower latency, and so on. Owing to the growing demand for 5G, manufacturers are also increasing their presence within the 5G market, by offering more 5G compatible devices.

According to a report by the Global mobile Suppliers Association, by the end of June 2021, the number of commercial 5G devices rose 29.2% over the last quarter while the number of 5G devices announced increased 24.2%. The report further stated that by the end of June 2021, at least 381 5G phones became commercially available, growing by 31 from May.

Reflective of the positive developments that are being witnessed in the demand for smartphones, it is quite expected that in 2021, there will be an overall improvement in the shipment of smartphones globally. Toward that end, the International Data Corporation (“IDC”) stated in a report that in 2021, smartphones are expected to grow 7.7%, its highest level since 2015. The momentum is expected to continue next year as well with the IDC predicting that shipments will grow 3.8% in 2022. 5G compatible smartphones are expected to witness robust demand as the IDC also stated that in 2021, shipments are expected to grow nearly 130%.

4 Stocks Watch Out For

Smartphone sales are making a comeback this year with discretionary spending witnessing a turnaround and the popularity of 5G technology rising across the globe. These factors, therefore, make it prudent now to keep an eye on both smartphone and smartphone component manufacturers with strong fundamentals that stand to benefit from this turnaround. We have selected four such stocks that carry a Zacks Rank #1 (Strong Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jabil Inc. (JBL - Free Report) provides end-to-end product development with comprehensive engineering capabilities. Its capabilities specific to mobile accessories include metal stamping and precision machining, decorative 2.5D, 3D touch displays, laser selective plating, antenna design, and so on. With the demand for smartphones making a comeback, Jabil being a major smartphone component supplier, is sure to benefit.

Shares of the company have gained 33.9% year to date while it currently flaunts a Zacks Rank #1. Jabil also performed well in fiscal third-quarter 2021 with revenues increasing 13.9% year over year. The Zacks Consensus Estimate for its current-year earnings increased 9.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 91%.

Apple Inc. (AAPL - Free Report) forayed into 5G by launching iPhone 12 in October 2020. Sales of this latest iPhone have also skyrocketed. Within seven months of the launch, overall global sales of the iPhone 12 series crossed 100 million in April 2021, per a report by Counterpoint Research. In fiscal second-quarter 2021, the series drove the iPhone sales, which increased 65.5% on a year-over-year basis. The company is also expected to introduce 5G to its budget smartphone lineup, namely the iPhone SE, in 2022, as reported in a Mint article. This should help the company in bolstering iPhone sales in emerging markets like India as 5G becomes increasingly popular.

Apple has also gained 12% year to date and currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 1.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 58.2%.

Micron Technology, Inc. (MU - Free Report) offers discrete DRAM, discrete NAND and managed NAND, which includes eMMC and universal flash storage solutions products, under its Mobile Business Unit segment, that are sold to smartphone and other mobile-device markets. The company believes that it can benefit from the adoption of 5G as well as other factors like the emergence of foldable smartphones, among others. In fiscal third-quarter 2021, Micron saw revenues from its Mobile Business Unit rising 31% year over year, bolstered by robust demand for smartphones and 5G handset sales in particular.

Year to date, shares of Micron have risen 1%. Micron currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 8.2% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

Qorvo, Inc. (QRVO - Free Report) provides radio frequency and WiFi solutions for mobile devices, under its Mobile Products segment. The rapid pickup in the timeline of 5G deployment augur well for Qorvo and the company is part of 5G field trials and demonstrations. In fiscal fourth-quarter 2021, the company saw its revenues increasing 36.2% year over year with improvements in the Mobile Products segment. Revenues from this segment increased 45% year over year. The results of the company were bolstered by the overall demand for 5G handsets.

On May 6, Qorvo’s also announced the acquisition of NextInput, which will be part of its Mobile Products unit. NextInput provides force sensing solutions for the next generation of human-machine interface.

Year to date, shares of Qorvo have risen 16.1% and it currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings 7.5% over the past 90 days. The company’s expected earnings growth rate for the current year is 14.7%.

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