IoT Could Become the Hottest Game in Tech: Get In on the Action With This Canadian Player

The internet of Things is growing rapidly, and companies like Sierra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR) are poised to capitalize.

| More on:

Many technology gurus have argued that the Internet of Things (IoT) will be the dominant technology of the future. We have already seen significant IoT investments by many of the world’s technology giants, including Alphabet (Google), Amazon, and Microsoft, as these companies strive to become market leaders.

Consumer-focused IoT products such as smartwatches, smart TVs, and smart home products are already ubiquitous in the marketplace. Smart appliances, connected cars, and remote tracking devices are expected to become commonplace in the years to come.

IoT will make business more efficient in many different ways. For example, retailers will use it to improve inventory management by embedding radio frequency identification devices in products to track when they are sold and to automatically order more, and manufactures will use it to collect data from machines to diagnose mechanical problems.

Governments and municipalities will also utilize IoT. One often-discussed application is to design smart cities. These smart cities could utilize IoT to make traffic lights more efficient, notify the public of open parking spaces, and boost electricity to areas that most need it.

With so many potential applications, IoT represents an enormous market opportunity. In a 2017 report, the U.S.-based research and advisory company Gartner estimated that the number of connected things will increase from 11.2 billion units this year to 20.4 billion units in 2020, while IoT hardware spending will increase from US$2.1 trillion to US$2.9 trillion over the same period.

Investors looking to capitalize on the IoT market should carefully consider Sierra Wireless (TSX:SW)(NASDAQ:SWIR). Sierra can be described as a “pure-play” IoT company. The company is a market-leading supplier of embedded modules that allow devices to wirelessly connect to networks and/or other devices. Sierra also sells secure networking hardware such as routers and gateways and provides cloud services that can be used to manage connected devices, IoT subscriptions, and over-the-air updates.

In 2017, Sierra recorded US$692.1 million in revenue and an adjusted EBITDA of US$54.2 million, which represent an increase of 12.4% and 23.4%, respectively, over 2016. The company continues to grow this year; its second-quarter revenue and adjusted EBITDA increased by 16.4% and 4.7%, respectively, over the corresponding period last year.

The company has a relatively strong balance sheet with a current ratio of 1.6, a quick ratio of 1.3, and virtually no long-term debt.

Bottom line

IoT brings together wireless connectivity, cloud computing, and big data. This technology is rapidly entering the mainstream, and its growth prospects are undeniable. This growth could rapidly accelerate as more applications are developed and legitimate security concerns are addressed.

Growth investors who are looking to make an IoT play should consider Sierra Wireless. As a global leader in embedded modules, routers, and gateways, Sierra is well positioned to capitalize on the rapid growth in IoT devices. Its stock, which traded as high as $39.79 per share mid last year, is currently at around $28 per share. This price represents an attractive entry point for IoT investors with a long time horizon.

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Fool contributor Kenrick Vassall has no position in any of the stocks mentioned. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, and Sierra Wireless. Tom Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). The Motley Fool owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, and Sierra Wireless.

More on Tech Stocks

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

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 »