Best Fiber Optic Stocks To Buy Now: Fiber optics are the present and future of internet connectivity, as they allow for the transmission of large swathes of digital information and data. They do it using light pulses to represent 1s and 0s along a glass or plastic fiber. It’s the most stable and reliable method used for long-distance data transmission, including across oceans.
Although it’s a trusted solution, the upgrade cycle to fiber optics has a long runway still. And as carriers rush toward a 5G-connected world, fiber optics are being relied on more and more. Many investors largely ignored the 5G sector, which created a domino effect where upstream suppliers got brushed past too.
This leaves a valuable investment option wide open for anybody who’s looking to win big. While bulls believe it’s the future of connectivity, bears respond by reminding investors that it doesn’t necessarily mean any of the hardware companies will see huge gains. It could very well be the software and online companies who do.
Cloud-based tools are an important part of our connected future, and fiber optics will be pivotal in that rollout.
Ciena Corporation (NYSE:CIEN) is a Hanover, Maryland-based telecommunications networking equipment and software service supplier. It’s one of the biggest players in optic connectivity in the world and was valued at around $8 billion at its low point in the past few years.
The company’s fiscal year 2021 revenue was $757.1 million, which was a 9.1 percent year-over-year drop from the same quarter of the previous year. However, it did increase its gross margin to 47.3 percent and operating margin to 10 percent. This represents a 2.8 percent and 0.6 percent year-over-year increase, respectively.
Of course, with the 5G rollout in full swing, Ciena Corp is sitting at its price target by most analysts’ estimates. Its second quarter earnings are expected to show a decline, and that could lower CIEN share price further, presenting a buying opportunity for long-term investors.
The consensus outlook is optimistic long-term. There are forward-looking statements to consider, as the infrastructure buildout should favor the fiber-optic giant. CIEN has the possibility of landing very lucrative long-term contracts now that carriers are back to upgrading their networks.
The company is not the only big player on the block though, and we need to examine the others in light of this company’s dominance. This is especially true considering all the components involved in a fiber optic network.
Lumentum Holdings Inc (NASDAQ:LITE) is a San Jose, California-based fiber optics company that’s been in the game since 2015. It has over 5,000 employees and has a consensus Buy rating based on its most recent earnings reports and industry data. And the company’s market value of $6 billion means it’s a smaller company than Ciena.
Deployment delays hit the company hard after its fiscal third-quarter earnings report. The news was received poorly with sellers pushing LITE share price down by 17 percent – and it’s been slow to climb back up. The company’s stock price has always been volatile, and it stands to reason that volatility will continue.
Much of the reason investors ignored the 5G sector is because of pricing unpredictability. These are dependent on the price of the installations and can be difficult to forecast. Once an ocean line is laid, for example, it’s not easy to patch any issues that come up. The equipment is sufficiently fragile to cause some investors to shy away altogether.
Lumentum however, specializes in transceivers, and it’s shifting its business toward transceiver parts to move around the competition. This should help to fuel significant growth opportunities during the 5G rollout.
Still, the market is still concerned about 3D threats and may not believe in the profitability forecasts. If it can maintain its trajectory and pick up the tailwinds from its 5G-focused Optical Communications business, investors could enjoy significant upside.
Commscope Holding Company Inc (NASDAQ:COMM) is a Hickory, North Carolina-based company that provides global network infrastructure to customers in over 130 countries.
In recent quarters, COMM share price has slowly risen from the depths on the back of more orders to reinforce the worldwide internet. As the public started working and going to school from home, the company’s revenue was catapulted higher from $8.35 billion in 2019 to $8.44 billion in 2020.
While that 1.1 percent year-over-year increase isn’t a lot, it’s a huge difference compared to its rivals. And it was fueled by its Broadband Networks segment, which isn’t necessarily 5G based. Many cable, DSL, and other broadband operators had to upgrade infrastructure to account for the shift from commercial to residential offices.
This created an opportunity, and the company was able to capitalize on it while the competition struggled to gain traction. This helped fuel growth of over $4 billion, which it may very well be able to sustain while building up to possibly double its current size.
The Internet of Things, artificial intelligence, and automation are key factors fueling the growth of technology. As we continue moving forward, these technology trends will be what drive us, and these three companies are deeply embedded.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.