Wireless Technology to Power InterDigital Stock Higher
Mobile technology has advanced beyond our imagination, and demand for higher speeds and data connectivity continues to grow.
Industry players have been working on new technologies to handle this trend and take us to a new era of wireless networking. The days of waiting seem to be over as the era of fifth-generation (5G) wireless begins.
5G is the latest in mobile technology, and it promises to exponentially increase the speed of wireless networks. Due to higher available bandwidth and other advancements, real-time feedback will be possible. This will strongly boost the Internet of Things (IoT) markets and speed up smart city projects.
InterDigital, Inc. (NASDAQ:IDCC) is a mobile technology research and development company that designs and develops wireless technologies for mobile devices, networks, and services worldwide.
With clients like Apple Inc. (NASDAQ:AAPL), Samsung Electronics Co Ltd (OTC:SSNLF), LG Electronics Inc. (KRX:066570), and Huawei Technologies Co., Ltd, InterDigital stock is in a strong position to gain from the rise of 5G technology.
As per MarketsandMarkets Research Private Ltd., the 5G infrastructure market is projected to touch $2.9 billion in 2020 and $33.7 billion by 2026. This translates into a compound annual growth rate (CAGR) of 50.9% between 2020 and 2026. (Source: “5G Infrastructure Market worth 33.72 Billion USD by 2026,” MarketsandMarkets Research Private Ltd., last accessed July 12, 2018)
The major factors driving the growth of the 5G market include the increasing demand for mobile data services, the rising importance of software in communication networks, and the growing demand for high-speed large network coverage.
And this is just one part of the huge 5G technology market. The many applications and services that ride the 5G tide could result in a market worth trillions of dollars.
InterDigital has patents on many 5G technology designs, which means a lot of companies are going to pay to use its technology in the coming years. This is a strong catalyst for IDCC stock.
The company licenses its technology to the manufacturers of wireless devices and the revenue is based primarily on royalty payments.
InterDigital announced its financial results for first-quarter 2018 in April. The quarter was marked by a five-percent decrease in operating expenses, continued licensing strength, a new tax rate, growth, and profitability. (Source: “InterDigital Announces Financial Results for First Quarter 2018,” InterDigital, Inc., April 26, 2018.)
The company reported first-quarter revenue of $87.4 million, which was the result of the impact of a new accounting standard. Under the previous accounting standards, the quarterly revenue would have been $104.9 million.
InterDigital has been careful with its expense management and in dealing with the positive impact of a new tax rate on its business. Last year was a strong one for InterDigital, with $532.9 million in revenue and $315.8 million in cash flows from operations. (Source: “Annual Report 2017, InterDigital, Inc., December 31, 2017.)
The IDCC stock price has been gaining consistently over the years on account of increased optimism.
The stock has gained about 12% over the last year and more than 130% in the last five years, as the following InterDigital stock chart shows.
Chart courtesy of StockCharts.com
The world is getting ready to embrace the 5G revolution, and InterDigital, Inc. stands to reap enormous gains as a leading pioneer of wireless research and development. The company is defining the future of wireless technology with higher growth likely to come from 5G-enabled smartphones, IoT, and smart cities.
Not only will mobile broadband speeds be dramatically increased, but new doors will be opened for industries beyond telecommunications.
As the consumer demand for high-speed Internet and data connectivity continues to grow, 5G is a space that will remain attractive for quite some time. Investors who want to take advantage of this should not ignore IDCC stock.