4 Companies Ready To Cash In On A Nexus 5

Chris Lao, Kapitall: Speculation about a Nexus 5 smartphone is overshadowing the new Android operating system.

So Google (GOOG) unveiled KitKat as the name for the next version of its Android operating system. In the video, a capture of an employee using an unnamed Nexus phone fueled speculation a possible Nexus 5 smartphone will be released. If the rumors of a Nexus 5 are true, there are a number of companies that stand to benefit.

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LG (LPL) was identified as producer of the mysterious Nexus 5 (a bit of a giveaway since its logo appeared on the device). Shares in the company are up sharply since bottoming in late June. LG trades at a Price to Book ratio of 1x. The company has improved its balance sheet by reducing long-term debt steadily over the last four years. The company still needs demand for LCD TVs to strengthen, and is developing an OLED TV to spur demand. And in the second quarter, tablet and smartphone sales declined significantly. A Nexus 5 release could reverse this decline.

Click on the interactive charts below to see data over time. 

The Nexus 5 could have a Snapdragon 800 made by Qualcomm ( QCOM ) and a 5-inch display. Qualcomm shares are at a high, and could continue to move higher after the new Nexus is released:

With a 7-band LTE, the device would be compatible on both the Sprint ( S ) and AT&T ( T ) networks. AT&T’s shares now yield a generous 5.39%, thanks to the stock declining from a high of $38.51 in April. Sprint shares do not pay a dividend. But the company is lowering the cost of servicing its debt, and recently announced a private placement, saying it would use the funds to redeem or service outstanding debt.

Bottom Line

Interest is high that Google will officially announce a Nexus 5. If Google meets the strong demand with sufficient unit availability, many companies will stand to benefit. When the Nexus 4 was released last year, demand was so high that many buyers were faced with an “out of stock” message. Income investors might want to consider AT&T, given the high dividend yield. LG shares could benefit too, though stronger demand for televisions would be a better catalyst. Qualcomm shares are already at another high, so the upside may be limited. A dip in its shares may offer a better entry point.

 

Written by Chris Lau, a Kapitall Contributor. Data sourced from Zacks Investment Research. 

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