This week’s sector report covers wireless communications and telecom, and details how the adoption of 5G Networks and IoT, as well as consolidation, will transform the industry. More importantly, our series of interviews with public company CEOs and top-ranked equity analysts pick the stocks that are ripe for investment.
Matthew Robison is a Managing Director of Wunderlich Securities, following the devices and networking equipment and services technology sectors. Mr. Robison has been named among the best-performing stock pickers in the communications equipment industry by Forbes, Financial Times, The Wall Street Journal — and most recently by StarMine.
“5G spectrum has much greater scope than any other generation of mobile technology, ranging from RF to microwave to millimeter wave, which is especially new in the context of linking mass-market devices or access points…it involves a lot of new challenges, especially the millimeter wave spectrum, which is a higher-frequency spectrum and doesn’t have the same sort of coverage characteristics as what has been used for device access up to now…We don’t tend to think of things as just wireless so much anymore. 5G is an overarching new protocol that is going to create an upgrade cycle.”
Mr. Robinson’s picks for bridging to the new 5G world include NETGEAR (NASDAQ:NTGR) and Aerohive (NYSE:HIVE).
Robert Gutman is Director and Equity Research Analyst covering the communications infrastructure and telecom services sectors at Guggenheim Securities. Mr. Gutman sees consolidation as the way to play the telecom sector:
“…probably the greatest issue today is how the current administration views carrier consolidation. So there’s been a lot of commentary from Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) executive management about a potential combination of the two carriers. This idea was scuttled by regulators in 2014, but many believe the current administration could be more favorable.”
This leads Mr. Gutman to downgrade a key component of the current wireless industry.
“If so, we believe the merger could be negative for towers. The combined tower footprint of over 110,000 macro sites would be in excess of what is needed to provide nationwide coverage, which we estimate to be near 70,000 sites.”
Amy Yong of Macquarie Group also sees these two mobile carriers as ripe for another try for a merger:
“I’m actually very positive on Sprint. I feel like a lot of investors don’t give them enough credit for having a massive spectrum position. And then also, obviously, to the extent they have $20 billion of NOLs, that could be very meaningful in a potential merger with T-Mobile.”
Clearly, this industry will be transforming itself yet again, and this issue of the Wall Street Transcript devotes itself to predicting how investors can participate.
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