After years of talk and preparation, it’s finally ready to come to fruition. The 3rd Generation Partnership Project, or 3GPP, has approved the first 5G network standards six months ahead of schedule, and many on Wall Street are very positive on the added spending for 2018 that will accompany the new standard. 3GPP is expected to publish the specifications soon that will enable companies to start building 5G equipment.
5G is a new network system that has much higher speeds and capacity, and much lower latency, than existing cellular systems. 5G networks will use a type of encoding called orthogonal frequency-division multiplexing (OFDM), which is similar to the encoding that Long-Term Evolution (LTE) uses. The air interface will be designed for much lower latency and greater flexibility than LTE.
In a new research report, Oppenheimer makes the case that with the new tax reform lowering corporate tax burdens, the major carriers will have cash to start the 5G rollout in 2018, and the firm sees four top companies being major beneficiaries of the new standard. All are rated Outperform
American Tower
This wireless tower company is a top pick on Wall Street and is acknowledged as an industry leader. American Tower Corp. (NYSE: AMT) is the largest global owner and operator of wireless and broadcast communications towers. Its portfolio includes approximately 140,000 sites in the United States, Latin America, India, Europe and Africa. The core business for the company is leasing space on its wireless towers, primarily to wireless carriers, government agencies and broadband data providers.
On a multiple basis the stock trades cheaper than the competition, and many top analysts around Wall Street feel the growth potential for the company remains among the best in the industry.
American Tower reported strong third-quarter results with revenue and adjusted earnings above Wall Street forecasts, and other firms in addition to SunTrust raised price targets.
American Tower investors receive a 1.75% distribution. The Oppenheimer price target for the stock is $160. The Wall Street consensus is slightly higher at $162.23. The shares closed Wednesday at $141.56.
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Boingo Wireless
This smaller cap company could be a top 5G play in 2018. Boingo Wireless Inc. (NASDAQ: WIFI) is a provider of commercial mobile wireless fidelity (Wi-Fi) internet solutions and indoor direct-attached storage (DAS) services. The company operates as a service provider of wireless connectivity solutions across its managed and operated network and aggregated network for mobile devices such as laptops, smartphones, tablets and other wireless-enabled consumer devices.
Boingo Wireless acquires long-term wireless rights at venues, such as airports, transportation hubs, stadiums, arenas, universities, convention centers and office campuses, and it builds wireless networks, such as DAS, Wi-Fi and small cells, at those venues and monetizes the wireless networks through a range of products and services. As of December 31, 2016, the company operated 36 DAS networks containing approximately 19,200 DAS nodes. Its Wi-Fi network includes locations that the company manages and operates, as well as networks managed and operated by third-parties with whom it contracts for access.
Oppenheimer has a $30 price target, and the consensus price objective is $24.91. Shares closed Wednesday at $23.05.
Equinix
This is one of the larger capitalization companies in the data center industry. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.
The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.
Investors receive a 1.77% distribution. The stunning $525 Oppenheimer target price was raised from $500, while the consensus price objective is $524.09. The shares closed Wednesday at $451.69.
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Zayo Group
This has been a rumored takeover candidate and is another potential 5G winner. Zayo Group Holdings Inc. (NYSE: ZAYO) provides comprehensive bandwidth infrastructure services in over 300 markets throughout the United States and Europe. Zayo delivers a suite of dark fiber, mobile infrastructure and cloud and connectivity services to wireline and wireless customers, data centers, internet content providers, high-bandwidth enterprises and government agencies across its robust 82,000 route mile network.
The company also offers 45 carrier-neutral data center facilities across the United States and France. Zayo was the first to offer bandwidth shopping and buying in under two minutes through Tranzact.
Oppenheimer has set its price target at $42. The consensus target is $36.80, and shares closed Wednesday at $36.62.
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The Oppenheimer team sees these four top companies as direct beneficiaries of the move to 5G. Given the benefits of the tax reform changes for corporations, they are probably right in the assumption that the top carriers will aggressively spend to roll out 5G in 2018.
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