London, England, 4th June 2021, ZEXPRWIRE – With all excitement about 5G technology, you may assume any stock tied to this next-gen technology would be super-expensive, especially in the current market. Fortunately for today’s investors, this is not the case.
Several extremely high-quality 5G firms are still trading at reasonable or inexpensive prices today, as reported by NostraCapital Analyst. As investors rush from profitless growth stocks to value firms that are already profitable, Facebook (NASDAQ: FB), Micron Technology (NASDAQ: MU), and Kulicke & Soffa (NASDAQ: KLIC) all appear to be strong 5G investments this month.
At first look, Facebook may not appear to be a 5G stock, but its recent first-quarter results call revealed glimpses of what’s to come in the 5G age. On that call, CEO Mark Zuckerberg spent his opening remarks highlighting newer Facebook products instead of the leading digital ad business.
App innovation in fields like mixed and virtual reality should be facilitated by 5G technology, and Facebook has made significant investments in this area. The Oculus Quest 2 AR/VR headset, in particular, was praised by Zuckerberg for its unique wireless streaming capabilities — a challenging technological accomplishment in the VR headset sector, which has traditionally required heavy cables to function. As a result, quest 2 has performed better than predicted, and creators create far more than simply games. According to Zuckerberg, apps like the FitXR for VR boxing and dancing routines are an example of how VR’s use cases are evolving.
Facebook’s “other” non-advertising income increased by 146 percent in the first quarter, mainly owing to Oculus sales and payments. So even though “other” revenue accounted for just 2.8 percent of overall sales last quarter, the growth rate is significant, and a $2.1 billion run rate is nothing to sneeze at.
Aside from AR/VR, Zuckerberg mentioned new projects on Facebook’s core platforms broadening content makers’ toolkits. Written, visual, video, and filter material may all be found on Facebook and Instagram. All of these skills will be boosted by 5G, which has the potential to further “professionalize” social media content. This might open up even more income opportunities for Facebook.
Meanwhile, Facebook’s core digital ad business is booming, and it stands to gain from the 5G era’s improved connection. Last quarter, ad revenue increased by 46%, while operating income nearly doubled, increasing by 93%. Facebook will continue to reinvest these substantial profits in fresh growth prospects and stock buybacks in the future.
Despite its rapid growth and additional $64 billion in cash on the balance sheet, Facebook currently trades at 25 times run-rate earnings after annualizing the $3.30 it made last quarter to $13.20. That’s a smaller multiple than its FAANG competitors, and it appears to be a bargain, making Facebook an excellent investment for the 5G era.
Micron CEO Sanjay Mehrotra predicted revenue “at or above” the high end of its current quarter projection, as well as “excellent” profit, at a recent industry conference. Despite this, Micron’s stock is still down approximately 12% from recent highs. Although Micron is one of the primary benefactors of the present semiconductor shortage, this is the case.
Micron’s DRAM memory and NAND flash are in high demand due to 5G and other digital developments brought on by the epidemic, and prices for these components are rising. Meanwhile, at least in DRAM, supply has been controlled in recent years. As a result, even NAND memory, which has long been oversupplied, is witnessing price rises these days.
Micron is a highly cyclical company that swings in counter-intuitive ways as speculators await the next downturn. However, I believe that critics are underestimating the current upturn’s duration. With such a significant increase in demand resulting from the pandemic digitalization tendencies, it may take some time for the industry supply to catch up. For example, new Intel CEO Pat Gelsinger estimates that it would take at least two years to bring the chip deficit under control.
Micron appears to be on track to generate billions in cash flows over the next two years while trading at just roughly eight times next year’s profit expectations. Even if the stock price doesn’t respond to all of this excellent news, Micron will be able to acquire a considerable quantity of shares in the meantime, as it has promised to do with at least 50% of its cash flows.
Micron’s stock might rise considerably in the future years if either the present up-cycle in memory lasts longer than the market expects or if the next downturn is less severe than the one precipitated by the US-China trade war.
- KULICKE & SOFFA
Not only will 5G put a strain on memory and logic chips, but because 5G phones have more memory and logic, 5G will necessitate unique, sophisticated methods of linking these pieces. Kulicke & Soffa, a pioneer in advanced packaging equipment, could gain from this.
CEO Fusen Chen stated on a recent conference call with analysts: “We expect a lot of additional demand for this multichip package as we go from 4G to 5G. So, right now, we do not only see the total amount of demand required, but the multi-chip package also has a higher capital intensity since it has a lot of connection.”
Kulicke & Soffa has also joined the mini-LED industry, a new display technology used in the latest televisions and the new iPad Pro that offers a quality upgrade over LCD panels. In addition, expect more tablets, smartphones, and PCs to use mini-LED technology when 5G becomes available. As a result, the mini-LED market is expected to “accelerate throughout fiscal 2022 and a multiyear ramp to continue,” according to Chen. The mini-LED segment currently accounts for a small portion of K&S’s revenue. Still, as it expands this year and next, it has the potential to become significant and boost Kulicke’s baseline revenue and earnings.
This discounted dividend-paying company, which trades at only 11.2 times this year’s profit expectations, might soar throughout the 5G era.
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