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2 Pick-and-Shovel Plays for Major Digital Infrastructure Buildout

Written by Nathan Reiff. Published: 6/1/2026.

Digital infrastructure is big business as companies race to build the operations needed to support AI integration, connectivity solutions, and more. Given the intense demand for data centers, hardware, and related products, investors may want to look at pick-and-shovel plays in the industry—firms that provide the critical components and services others rely on, even if they are not the biggest or flashiest names in the space.

Among a growing group of digital infrastructure companies, two stand out for their critical positioning and analyst support: Quanta Services Inc. (NYSE: PWR) and MYR Group Inc. (NASDAQ: MYRG). The firms differ in many respects—including size, for one, as Quanta has a market capitalization of $110 billion compared with just $7 billion for MYR—but both have the potential to secure a strong foothold in the booming data infrastructure business.

Quanta Services Expands Its Offerings to Serve Data Centers, With Impressive Results

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Quanta Services is known as a provider of transmission and distribution systems, construction, grid modernization services, and other offerings for the electric power industry. While it has traditionally partnered with utilities, independent power companies, and oil and gas firms, it has recently expanded its operations to include data centers.

This shift toward data centers has contributed to some impressive earnings results. In the first quarter of the year, Quanta reported 26% year-over-year (YOY) revenue growth to $7.9 billion, or about $873 million above analyst predictions. Adjusted earnings per share (EPS) of $2.68 also came in 64 cents ahead of expectations. Adjusted EBITDA of $686 million was notable, and the company raised its full-year guidance for both revenue and EPS, a sign of optimism about its future prospects.

Quanta's backlog should help continue to drive growth going forward. The firm reached a record backlog of $48.5 billion in the first quarter of 2026, thanks to broad-based bookings from utilities, data centers, hyperscalers, and more. The business is successfully diversifying to include these newer clients—and unlike some rivals, Quanta is not abandoning its core utility services.

On top of these noteworthy performance highlights, Quanta is also investing heavily in its future by dedicating up to $700 million to double its transformer manufacturing capabilities. The firm also plans to nearly double its off-site fabrication capacity to almost 7 million square feet. All of this supports its goal of more than doubling earnings by 2030. Analysts expect nearly 18% earnings growth in the coming year, which would be a healthy start toward achieving that ambitious target.

Expectations for strong earnings growth are just one reason analysts are bullish on Quanta. Twenty out of 27 rate PWR shares a Buy, even after the stock has surged by more than two-thirds year-to-date (YTD).

MYR Group Is Well-Positioned in the Data Center Landscape, But Margin and Share Price Concerns Linger

A much smaller company than Quanta, MYR Group is also involved in specialty electrical services. The company has traditionally offered turnkey solutions such as overhead and underground line construction, installation and maintenance of substations, and related services. Like Quanta, MYR is also becoming increasingly involved in data center construction, providing critical electrical services.

MYR has also experienced solid growth in recent periods, with Q1 2026 bringing 20% YOY improvement in revenue and a $68 million sales beat. Sales reached $1 billion for the quarter, a noteworthy milestone. EPS is also thriving, nearly doubling YOY to $2.99 in the first quarter and beating predictions by 90 cents. Both net income and EBITDA, at $47 million and $82 million respectively, were quarterly records for the company.

Like Quanta, MYR has a solid backlog of $2.8 billion, up 8% YOY in the first quarter. The company is also generating healthy cash, finishing Q1 with $163 million in cash and strong borrowing availability, operating cash flow, and free cash flow. While MYR has not yet made significant moves to deploy that capital, it has the flexibility to invest in growth, pursue acquisitions, or initiate a buyback plan.

Investors will likely want to see MYR continue improving its margins going forward. Gross margin of 13.4% in Q1 was a marked improvement from 11.6% previously, but there is still room for growth there. Analysts are similarly optimistic about the company: five out of eight call MYRG stock a Buy. However, investors may want to be mindful of the stock's near-term share price potential. Now that the stock has risen more than 100% YTD, the analyst consensus price target is actually about 20% below current levels.

Five Below Down 12% Post Earnings—Is the Selloff Overdone?

Written by Chris Markoch. Published: 6/5/2026.

Five Below (NASDAQ: FIVE) fell more than 13% the day after the company reported a mostly bullish Q1 2026 earnings report. The discount retailer delivered revenue of $1.29 billion, which beat expectations for $1.23 billion and, more importantly, was 32% higher year over year (YOY).

The results were even better on the bottom line. Adjusted earnings per share of $2.22 beat expectations of $1.77 and were 158% higher on a YOY basis.

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The company reported a resilient consumer that is responding to its digital marketing efforts. Five Below also said the strength was broad-based across incomes, stores, and departments.

The strength of the results wasn’t just about store traffic. The company’s margins improved thanks to fixed-cost leverage.

Five Below ended the quarter with $1.1 billion in cash and investments on its balance sheet.

The issue was the company’s guidance. While Five Below raised its full-year outlook, management expressed some concern about the second half of the year. That’s when uncertainty about the health of the consumer will collide with tougher YOY comparisons.

Investors Focus on Consumer and Tariff Risks

Five Below is known for providing a treasure-hunt experience for consumers. So it’s a little ironic that the company’s immediate problem is one that’s hiding in plain sight. The elephant in the room is the future state of the consumer.

The strong quarter needs context, since earnings headlines are always backward-looking. On the earnings call, Five Below management noted that the company’s results were likely helped by consumers spending a portion of their tax refunds in its stores.

However, as with stock prices, past performance doesn’t guarantee future results. Five Below faces quantifiable tariff impacts that some analysts believe may be understated. It also has a consumer who continues to be pinched by higher gas prices, higher inflation, and, in some cases, unemployment.

That’s a perfect storm of uncertainty, and investors hate uncertainty.

Another area of uncertainty came from the company’s tariff guidance. Management expects tariffs to return to the levels they were at the start of the company’s fiscal year. Analysts weren’t so sure the tariff rollback would happen. A lighter forecast would be problematic at a time when Five Below continues its aggressive expansion strategy.

It's a binary outlook. If Five Below is correct, even the raised guidance may be too conservative. On the other hand, if tariffs remain in place, the guidance is probably too optimistic.

Why the Selloff May Be Overdone

The post-earnings reaction to Five Below’s results needs to be viewed in light of what happened before earnings. FIVE stock was down about 5% in the 30 days before the earnings report, due in part to other retailers telling a similar story about the state of the consumer.

Therefore, with shares trading at nearly double the normal volume, it’s hard to make the argument that all the selling was priced in. In fact, the counterargument could be that investors were hoping for bullish guidance that didn’t come.

That said, this wouldn’t be the first time the consumer has been counted out in the last few years. In the face of numerous obstacles, consumers continue to spend. Betting on the “this time it’s different” narrative may be a bad bet. And with short interest hanging around 3%, there doesn’t appear to be significant short pressure weighing on the stock.

That means the technical setup may give investors a more accurate picture. In this case, FIVE appears to have reached oversold levels.

Valuation Remains a Key Concern for Investors

Though the stock already looks oversold, investors waiting for a deeper pullback may find evidence that one could still be coming. Specifically, FIVE looks overvalued. The stock currently trades at around 30x earnings, which is a premium to the S&P 500 and its own historic average. A similar story is in place for the company’s price-to-sales (P/S) and price-to-book (P/B) ratios.

Investors have been willing to give FIVE a premium because of its positioning in the discount retail space. However, it’s important to note that FIVE currently trades at twice the P/E of Dollar General (NYSE: DG), Dollar Tree (NASDAQ: DLTR), and Ollie’s Bargain Outlet (NASDAQ: OLLI).

Analysts Remain Divided on FIVE Stock's Next Move

Analyst sentiment is mixed. The Five Below analyst forecasts on MarketBeat show three analysts weighing in immediately after earnings. Morgan Stanley lowered its price target to $235 from $242. However, that was offset by BNP Paribas Exane, which raised its target to $291 from $262.