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5 IoT Stocks to Boost Portfolio on 5G Boom-Led Demand Uptick

Zacks.com logo Zacks.com 3/31/2021

The concept of IoT entails several devices connected to the Internet for the purpose of gathering information, scrutinizing functionality and automating various systems. For instance, an IoT watch can monitor your health while an IoT-connected doorbell can easily send you a message whenever someone knocks at your door.

IoT-enabled sensors can control traffic lights and even be used by airlines to report maintenance issues. In fact, IoT allows supervision or automation of almost anything, right from light bulbs to automobiles and refrigerators to smart speakers at home.

IoT is rapidly gaining prominence amid the coronavirus outbreak as more and more enterprises turn to the technology for prevention and control of the pandemic.

Rapid increase of remote working, web-based education and health diagnosis amid lockdowns and shelter-in-place guidelines to curb the spread of the COVID-19 virus is expected to bolster spending on IoT.

Moreover, rise in demand for contactless delivery through drones, digital payments, bedside telemetry, electric vehicle charging, and remote health monitoring remains noteworthy.

Proliferation of IoT devices including sensors, smart device and proximity awareness applications to aid people to resume work, school and other activities amid social-distancing norms has gathered steam, amid reopening of economies.

Notably, 5G is expected to unlock the full potential of IoT-backed flourish of smart connected homes, hospitals, factories and cities plus self-driving vehicles.

New Normal Trends Aid IoT Growth Avenues

The growing clout of high-speed networking, smartphone processors and high-performance computing (HPC) data center applications against the backdrop of 5G and cloud-computing boom triggered by the new normal lifestyle is bolstering the development of advanced connected smart IoT devices.

Moreover, advancements in 5G, WiFi-6, data center, enterprise and automotive Ethernet applications accelerated the transformation in IoT devices. Further, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm and 3 nm technology is opening new business fields for innovation in IoT-driven connected devices.

Further, the momentum in applications, gaming, wearables, drones and VR/AR devices is fueling massive growth in the space. This can primarily be attributed to the coronavirus crisis, which increased the usage of online services, globally.

Despite the coronavirus pandemic-borne crisis, the optimism in this space is evident from the notable performance of Global X Internet of Things ETF (SNSR), which has gained 80.4% in the past year compared with the SPDR S&P 500 ETF Trust's (SPY) growth of 7.8%.

Per a Mordor Intelligence report, the global IoT market is projected to hit $1,386.06 billion by 2026 from $761.4 billion in 2020 at a CAGR of 10.53%, between 2021 and 2026.

Here we pick five stocks that are well-positioned to make the most of the IoT wave amid solid growth in 5G infrastructure spending and proliferation. All the five stocks have outperformed the S&P 500 composite in the past year.

Past Year Price Performance

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NXP Semiconductors N.V. NXPI is the leader in general purpose microcontrollers and application processors in the industrial and IoT markets.

The company is poised to gain from growth in the industrial and IoT businesses, driven by the replacement of traditional mechanical equipment with smart and connected electronic equipment utilizing various sensors, processors, connectivity and security chipsets among others.

The company, currently sporting a Zacks Rank #1 (Strong Buy), acquired Marvell’s MRVL WiFi Connectivity Business Unit, Bluetooth technology portfolio and its related assets for $1.76 billion in cash during May 2019 to expand its IoT portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s 2021 earnings estimate has been revised 12.6% upward to $9.31 per share over the past 60 days, indicating growth of 18.6% from the year-ago reported figure.

Rockwell Automation ROK offers industrial automation power, control and information solutions that help manufacturers achieve a competitive edge for their businesses.

The company, currently carrying a Zacks Rank #2 (Buy), is focused on enhancing its FactoryTalk Innovation Suite, which is a testament to its growing IoT efforts. The software aids businesses to leverage edge-to-enterprise analytics, ML, industrial Internet of things (IIoT) and AR to enrich decision making and boost the outcome of industrial operations.

Markedly, IIoT is a subdiscipline of IoT, encompassing connected large-scale machinery and industrial systems, such as factory-floor monitoring, Heating, ventilation, and air conditioning or HVAC, smart lighting and security.

Moreover, the company’s alliance with PTC PTC is noteworthy. Integration of Rockwell’s offerings with PTC’s Vuforia and ThingWorx platforms help clients automate, simplify and accelerate OT/IT convergence.

Also, fiscal 2021 estimates have moved 0.9% north over the past 60 days to $8.93 per share, indicating growth of 16.3% from the year-ago reported figure.

Qorvo QRVO is benefiting from broad-based demand in 5G handsets, Wi-Fi 6 and IoT products. Synergies from 7Hugs Labs S.A.S., Decawave, Active-Semi and MEMS technology acquisitions are expected to significantly expand Qorvo’s capabilities and poise it well to gain from growing demand for proximity awareness, seamless payments and secure access for smartphones, automotive and IoT.

In the IoT-powered connectivity and broadband business, the company is increasing shipments of Wi-Fi 6 solutions and secured multiple cable amplifier design wins to cater to the rising need for data to home owing to COVID-induced shelter-in-place guidelines.

The company recently enhanced wireless connectivity solutions portfolio with smart home communications controller — QPG6100 — in a bid to facilitate faster communications, and boost home network capacity and scalability.

The new communications controller for IoT end devices offers support for multiple ultra-low power wireless protocols simultaneously and is based on the company’s ConcurrentConnect technology.

The Zacks Consensus Estimate for this presently Zacks Rank #2 company’s fiscal 2021 earnings has been revised 8.6% upward to $9.45 per share in 60 days’ time, indicating growth of 49.3% from the year-ago reported figure.

Skyworks Solutions SWKS is well-positioned to capitalize on the growth prospects in the IoT market with rising demand for high-performance analog solutions in the emerging markets.

In fact, the company rolled out embedded connectivity modules to enable Fibocom to manage its enterprise IoT architectures. Skyworks expects to gain more businesses going forward with continued investments in research and development anticipated to boost its IoT portfolio.

Further, IDC expects 55.7 billion connected devices worldwide by 2025, 75% of which are anticipated to be connected to an IoT platform. As a result, we expect Skyworks to deliver solid operating results in the imminent future.

The company also partnered with MediaTek for evolving 5G reference designs with focus on automotive and other IoT applications.

The Zacks Consensus Estimate for this Zacks #2 Ranked company’s fiscal 2021 earnings is pegged at $10.27 per share over the past 60 days, suggesting growth of 67.5% from the year-earlier reported number.

Arrow Electronics ARW is cashing in on a strong uptrend in design activity across all regions. Strong momentum in infrastructure software, next-generation hardware and hybrid cloud architectures is encouraging as well.

Arrow’s core strength in providing best-in-class services and easy-to-acquire technologies will contribute to its growth in the future. Its continued focus on driving the Internet of things capabilities is assisting it in tapping newer markets and winning customers.

The company’s acquisition of eInfochips (2018), which is specialized in chip designing for products and IoT solutions, remains a boon in this regard. The buyout of eInfochips not only added to Arrow Electronics’ IoT capabilities but also created a large talent pool with impressive skillsets.

The Zacks Consensus Estimate for this #2 Ranked company’s 2021 earnings has been raised 14% to $10.25 per share over the past 60 days, implying growth of 32.3% from the prior-year reported figure.

5G Revolution: 3 Stocks to Make Your Move

With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.

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