Is Sierra Wireless, Inc. (TSX:SW) Still a Buy After Popping 22%?

Here’s why it’s not too late to invest in Sierra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR), but is it your kind of investment?

| More on:

Hong kong and connection concept; technology concept

Sierra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR) stock has seen exceptional performance as of late. Specifically, the stock has popped about 22% in the last two trading days after reporting its second-quarter results.

Sierra Wireless experienced revenue growth of 16.4% from US$173.4 million in Q2 2017 to US$201.9 million in Q2 2018. It increased revenue across all its business segments.

In particular, the tech company had incredible growth in its Enterprise Solutions segment, which increased 31.1% to US$28.4 million, as well its Internet of Things (IoT) revenue increased 209.6% to US$22.6 million, thanks to the strategic acquisition of Numerex and organic subscriber growth.

Its core sales still come from its Original Equipment Manufacturer (OEM) Solutions segment, which contributed about 75% of the quarter’s revenue.

The business

Sierra Wireless is a leader in building the IoT with wireless solutions for organizations. It offers a portfolio of 2G-, 3G- and 4G- embedded modules and gateways that seamlessly integrate with its secure cloud and connectivity services.

Growth potential ahead

In 2016, Business Insider estimated that “there will be 34 billion devices connected to the internet by 2020, up from 10 billion in 2015.” It also estimated that from 2016 to 2020, almost $6 trillion will be spent on IoT solutions.

Businesses and governments will invest in IoT solutions to reduce cost and improve productivity. Businesses can also expand product offerings by adopting IoT solutions.

For example, IoT can be used to create smart cities, including being used for garbage collection, such that garbage can be picked up in a timely manner when certain garbage cans are filled up faster.

Over time, more and more devices will be connected to the internet and communicate with each other. As the IoT leader, Sierra Wireless has lots of growth runway.

Is Sierra Wireless your type of investment?

It’s easy to get caught up in the euphoria of the moment after Sierra Wireless stock just climbed 22%. Surely, if you own the stock, it’s a good time to celebrate.

However, it’s important to point out that it’s an understatement to say that it has been a bumpy ride for Sierra Wireless investors. For example, the stock traded as high as $40 per share last year, only to lose as much as half of its value this year.

Investors should ask themselves if they can stomach the volatility. Put the investment in perspective by placing Sierra Wireless in the aggressive growth bucket of your diversified portfolio, and view it differently from the likes of Royal Bank of Canada and Fortis.

If you allocate a small percentage of say, 1%, of your portfolio to Sierra Wireless, the volatility of the stock should hardly cause a ripple in your overall portfolio.

Investor takeaway

Right now, the stock is still trading at the low end of its five-year trading range. Investors looking for growth could pick up some shares if they’re up for the volatility. For a bigger margin of safety, start buying the stock in the low $20s.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Sierra Wireless. David Gardner owns shares of Sierra Wireless. The Motley Fool owns shares of Sierra Wireless.

More on Tech Stocks

An investor uses a tablet
Tech Stocks

Canadian Tech Stocks to Buy Now for Future Gains

Not all tech stocks are created equal. In fact, these three are valuable options every investor should consider.

Read more »

dividend growth for passive income
Tech Stocks

2 Rapidly Growing Canadian Tech Stocks With Lots More Potential

Celestica (TSX:CLS) and Constellation Software (TSX:CSU) are Canadian tech darlings worth watching in the new year.

Read more »

BCE stock
Tech Stocks

10% Yield: Is BCE Stock a Good Buy?

The yield is bigger than it's ever been in the company's history. That might not be a good thing.

Read more »

Happy shoppers look at a cellphone.
Tech Stocks

So You Own Shopify Stock: Is it Still a Good Investment?

Shopify (TSX:SHOP) stock has had a run, but there's still room to the upside.

Read more »

A person uses and AI chat bot
Tech Stocks

AI Where No One’s Looking: Seize Growth in These Canadian Stocks Before the Market Catches Up

Beyond flashy headlines about generative AI, these two Canadian AI stocks could deliver strong returns for investors who are willing…

Read more »

Data center servers IT workers
Tech Stocks

Better Buy: Shopify Stock or Constellation Software?

Let's dive into whether Shopify (TSX:SHOP) or Constellation Software (TSX:CSU) are the better options for growth investors in this current…

Read more »

nvidia headquarters with nvidia sign in front
Tech Stocks

Nvidia Just Delivered a Beat-and-Raise Quarter. There’s 1 Red Flag Investors Shouldn’t Ignore.

The chipmaker continued to benefit from robust demand for artificial intelligence (AI). But can it last?

Read more »

GettyImages-1473086836
Tech Stocks

Why Super Micro Computer Stock Is Soaring Today

The volatile stock is getting a boost from Nvidia.

Read more »