Suppliers of 5G technology are getting some love on Wall Street this week, with several experts saying any trade tariff-related weakness should serve as a long-term buying opportunity heading into 2020.
On Monday, Bank of America analyst Vivek Arya double-upgraded 5G Apple, Inc. AAPL suppliers Qorvo Inc QRVO and Skyworks Solutions Inc SWKS from Underperform to Buy. Arya raised his price target for Qorvo from $80 to $130 and his target for Skyworks from $92 to $122.
“In our view, 5G could prove to be one of the more compelling and investable themes in semis, driven by the exponential growth in components required to upgrade ~1.4bn 4G smartphones and several hundred million IoT devices,” Arya wrote in the note.
He also reiterated his Buy rating and $345 target for Broadcom Inc AVGO.
Other Experts Weigh In
Arya isn’t the only analyst getting bullish on 5G stocks this week. On Tuesday, CNBC's Jim Cramer said investors should buy 5G stocks on any temporary weakness related to the looming Dec. 15 trade tariff deadline.
“When these stocks get hit, you buy [them] into weakness because you know they’ll be able to make a comeback as secular growers almost always will,” Cramer said.
He said investors should own at least one key 5G supplier among a group that includes Skyworks, Qorvo, QUALCOMM, Inc. QCOM and Marvell Technology Group Ltd. MRVL.
Cowen also joined in the bullish 5G parande on Wednesday, reiterating its Outperform rating for Qorvo and raising its price target from $95 to $120.
Semis Heat Up
Semiconductor stocks rallied on Wednesday, a move Tigress Financial analyst Ivan Feinseth told Benzinga is being driven by “a possible trade deal and the upcoming 5G upgrade cycle.” An under the radar 5G stock, Inseego Corp INSG, was up about 4.4% in Wednesday's session.
However, at least one study suggests investors should keep their 5G expectations in check. NPD Group reported that less than 10% of Americans spend more than $1,000 on their smartphones, suggesting that initial demand for high-end 5G devices may be capped simply due to their pricing.
Regardless of whether the 5G boom comes in 2020 or beyond, Cramer is right that wireless network technology is a secular growth trend. The major considerations investors need to have in the near-term is the valuations of stocks involved and any changes in their share of the mobile market.
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