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Strong Demand for Wireless Infrastructure Makers: 5 Top Picks

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U.S. stock markets have remained highly volatile so far this year. Lingering trade conflicts between United States and China, an impending global economic slowdown, inflationary concerns, possibility of another rate hike by the Fed and several geopolitical issues are the primary reasons behind the market instability.

However, the wireless infrastructure industry maintained its bull run despite the ominous circumstances, surprising many investors. Growing demand for real-time voice, data, and video has encouraged wireless operators to upgrade their networks. This in turn has provided a boost to the demand for wireless infrastructure developers. Consequently, it will be prudent to invest in wireless infrastructure developers stocks with a favorable Zacks Rank.

Strong Wireless Infrastructure Market

With rapid growth in video and other bandwidth-intensive applications, the wireless industry participants are making considerable investments in LTE, broadband and fiber in order to provide additional capacity and ramp up Internet and wireless networks. The LTE network has the highest penetration rate of 91% in the North American region. This in turn will aid the wireless equipment manufacturers.

The impending 5G boom is likely to propel the wireless industry to newer heights. The success of 5G technology hinges on substantial investments to upgrade infrastructure in the core fiber backhaul network to support anticipated growth in data services.

In this regard, Internet of Things (IoT) has the potential to emerge as the numero uno factor for future growth in the space. Statista’s 2018 report on global telecom estimates that global telecom services revenues will reach around $1.5 trillion in 2019.

Two Primary Growth Drivers

The Trump administration has lowered the corporate tax rate from 35% to 21%, marking the its lowest in 78 years. Government’s tax cut resulted in a huge windfall for wireless operators. The carriers can utilize this money for 5G network R&D and its deployment. This will naturally bolster demand for wireless infrastructure.

Moreover, the Trump administration is deeply concerned about China’s drive to unseat the United States as the primary developer and supplier of products in the fields of high-tech sectors. So far, the U.S. government has imposed tariffs worth of $250 billion on Chinese goods. Most of these products fall in high-tech industrial sectors. It will raise prices of wireless equipment. Consequently, a hike in product prices will certainly help wireless infrastructure developers.

Industry Performance

Year to date, the wireless equipment industry has gained more than 4.3%, outpacing the Computer and Technology sector’s growth of a negative 2.9%. Notably, the wireless equipment industry is part of the Computer and Technology Sector. Moreover, growth of wireless equipment industry is also ahead of a negative 0.9% growth recorded by the benchmark S&P 500 index.

Our Top Picks

The United States is progressing well to lead the world in 5G — the next generation of wireless connectivity.  At this stage, it will be lucrative to invest in wireless infrastructure manufacturers stocks. We have narrowed our search to five such stocks with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below depicts price performance of our five picks year to date.

Comtech Telecommunications Corp. (CMTL - Free Report) designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The company has expected earnings growth of 28% for current year. The Zacks Consensus Estimate for the current year has improved by 26.3% over the last 60 days.

LM Ericsson (ERIC - Free Report) provides information and communications technology solutions for networks, IT and cloud, and media markets worldwide. The company has expected earnings growth of 159.6% for current year. The Zacks Consensus Estimate for the current year has improved by 47.4% over the last 60 days.

Ubiquiti Networks Inc. (UBNT - Free Report) is engaged in the business of designing, manufacturing and selling broadband wireless solutions worldwide. The company has expected earnings growth of 11.7% for current year. The Zacks Consensus Estimate for the current year has improved by 19.8% over the last 60 days.

Arista Networks Inc. (ANET - Free Report) is engaged in providing cloud networking solutions for data center and cloud computing environments. The company has expected earnings growth of 37.8% for current year. The Zacks Consensus Estimate for the current year has improved by 5.5% over the last 60 days.

Ribbon Communications Inc. (RBBN - Free Report) provides session border controllers, diameter signals, policy and routing servers, media and signaling gateways, cloud and mobility solutions. The company has expected earnings growth of 7.8% for current year. The Zacks Consensus Estimate for the current year has improved by 14.6% over the last 60 days.

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