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The adoption of 5G globally has been gaining pace for a while now and the trend is expected to continue in the near future. Notably, per a report by Research and Markets, the 5G services market was valued at $1.62 billion in 2020 and is estimated to reach $424.63 billion by 2026 at a CAGR of 155.5%.

The report stated that the main reasons behind the switch to 5G are that it offers low latency and higher data transfer speeds along with the capacity to carry a large number of connections. Such positive developments are sure to bode well for companies that are involved in the shift to 5G connectivity.

The report mentioned that an increase in mobile data traffic along with demand for high-speed connectivity is set to drive the 5G services market. It further stated that the number of VoLTE subscriptions, which enables voice and communication services on 5G devices, is estimated to reach 5.9 billion by the end of 2024 and account for more than 85% of combined LTE and 5G subscriptions.

Notably, the report also mentioned that North America is expected to have the largest market share during the forecast period as major telecom players in the region are enhancing their infrastructure to keep pace with the advancements in technologies. In fact, per a report by GSMA Intelligence, 5G is set to account for 51% of total mobile connections in North America by 2025. The need for faster connectivity has also been accelerated by the COVID-19 pandemic as social distancing norms pushed the world to adopt a remote working model. This trend is also likely to continue going forward. Notably, per a survey by Enterprise Technology Research, the percentage of remote workers around the world is expected to double in 2021 due to increased productivity during the pandemic, as quoted in a Reuters article.

Reflective of the increasing demand for 5G, the penetration of 5G smartphones is also estimated to accelerate. Notably, per a report by TrendForce, the penetration rate of 5G smartphones is expected to increase to 37% in 2021, following the 19% penetration rate in 2020. Moreover, the falling prices of 5G smartphones should surely drive this penetration. Notably, the International Data Corporation estimated in a report that the average selling prices of 5G phones is to drop to $453 in 2024 from an estimated $611 in 2020.

4 Stocks to Watch Out For

5G technology looks set to drive the next leg of growth in connectivity, owing to its faster data speeds and low latency. This makes it a good time to keep an eye on names that can benefit from this shift to 5G, going forward. Notably, we have selected four such stocks that carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). 

Apple Inc. AAPL designs manufactures and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. Notably, the company launched its iPhone 12 line up in October 2020, which support 5G networks. It currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 11.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 36.3%.

QUALCOMM Incorporated (QCOM - Free Report) engages in the development and commercialization of foundational technologies and products are used in mobile devices and other wireless products. Notably, the company offers Snapdragon 5G Mobile Platforms which feature a comprehensive modem-to-antenna system solution for 5G devices. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 2% over the past 60 days. The company’s expected earnings growth rate for the current year is 71.6%.

T-Mobile US, Inc. TMUS, through its subsidiaries, provides wireless services for branded postpaid and prepaid, and wholesale customers in the United States, Puerto Rico, and the United States Virgin Islands. Notably, the company merged with Sprint to create the United States’ largest 5G network. Currently, it covers over 8,300 cities and towns in America. The company presently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 4.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 17%.

Verizon Communications Inc. VZ offers communications, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. Notably, the company is offering its 5G Ultra Wideband network and 5G Nationwide network to deliver 5G connectivity services. It currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 0.8% over the past 60 days. The company’s expected earnings growth rate for next quarter is 7.6%.