Credit: Shutterstock photoPresident Trump is contemplating issuing an executive order to restrict select Chinese telecommunications equipment makers from selling products in the United States, per a Reuters report date May 2. Imposition of selling restrictions stems from U.S. administration's concern for national security and will primarily target Chinese telecom equipment behemoths Huawei Technologies and ZTE.
The Trump administration had previously barred U.S. companies from selling products to Chinese counterparts due to apprehensions of Chinese spying on Americans utilizing these high-tech products. This move is evidence of the fiercely aggressive stance that the U.S. government is taking to protect innovative next-generation products of the U.S. tech giants.
However, the move does not sit well with U.S. companies that rely on Chinese imports as it will raise prices of telecom equipment utilized by telecom service providers. Nevertheless, a hike in product prices will certainly help U.S. wireless equipment manufacturers. That is why investment in some of these stocks with a favorable Zacks Rank should prove to be lucrative.
National Security Concerns Dominate Telecom Space
Trump administration is deeply concerned about China's drive to unseat the United States as the primary developer and supplier of state-of-the-art products in the fields of high-tech artificial intelligence, semiconductors, quantum computing and various other digital technology driven sectors.
Notably, the Chinese government patronizes most of these big manufacturers. These companies have become serious threat to the U.S. economic and military supremacy. China runs a massive $375 billion yearly trade surplus against United States.
Huwaei, ZTE Targeted Earlier
In fact, the U.S. government made AT&T Inc. T drop Huawei smartphones from its offerings while Qualcomm Inc. QCOM was barred from selling its chipsets to either Huawei or ZTE. On Mar 12, Trump ordered to immediately prohibit the proposed $117 billion takeover bid of Singapore-based Broadcom Ltd. AVGO for Qualcomm.
The government argued that third party entities, especially, Huawei and ZTE may get access to Qualcomm's precious patents from Broadcom or at least a stalled R&D activity may result in Qualcomm losing its competitive edge in the upcoming 5G wireless network standard to its Chinese counterparts.
Our Top Picks
President Trump has given enough indication that his administration will take special interest in the functioning of the telecom industry. The safeguarding of the highly valuable patents of the American tech heavy companies from the Chinese dragon is of foremost importance to the American eagle.
At this stage, investors will be better off to investing in U.S. wireless equipment manufacturing companies, which are expected to benefit the most from upcoming U.S. tariffs on China. We have narrowed down our search to the following stocks with favourable Zacks Rank #1 (Strong Buy) or 2 (Buy) with strong growth potential.
Chart below depicts price performance of our five picks year to date.
Comtech Telecommunications Corp.CMTL designs, develops, produces and markets innovative products, systems and services for advanced communications solutions.
Comtech has expected earnings growth of 232.4% for current year. The Zacks Consensus Estimate for the current year has improved by 156.8% over the last 60 days. The stock flaunts a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .
Turtle Beach Corp.HEAR is an audio technology company. It designs audio products for consumer, commercial and healthcare markets.
Turtle Beach carries a Zacks Rank #2. The company has expected earnings growth of 254.2% for current year. The Zacks Consensus Estimate for the current year has improved by 516.7% over the last 60 days.
Cisco Systems Inc.CSCO is an IP-based networking company, also offering other products and services to service providers, companies, commercial users and individuals.
The stock carries a Zacks Rank #2. The company has expected earnings growth of 7.5% for current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 days.
PC-Tel Inc.PCTI designs, develops, and delivers wireless solutions. Its products include wireless local area network software products that simplify installation, roaming, Internet access and billing.
PC-Tel carries a Zacks Rank #2. The company has expected earnings growth of 25% for current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days.
Viavi Solutions Inc.VIAV provides software and hardware platforms and instruments for telecommunications service providers, wireless operators, cable operators, network-equipment manufacturers and enterprises.
Viavi carries a Zacks Rank #2. The company has expected earnings growth of 7.5% for current year. The Zacks Consensus Estimate for the current year has improved by 2.4% over the last 60 days.
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Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
QUALCOMM Incorporated (QCOM): Free Stock Analysis Report
Comtech Telecommunications Corp. (CMTL): Free Stock Analysis Report
PC-Tel, Inc. (PCTI): Free Stock Analysis Report
Turtle Beach Corporation (HEAR): Free Stock Analysis Report
Viavi Solutions Inc. (VIAV): Free Stock Analysis Report
AT&T Inc. (T): Free Stock Analysis Report
Broadcom Limited (AVGO): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
