Which Is the Better IoT Investment for Growth?

Sierra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR) may be the undisputed IoT must-have investment, but this other tech company is going to give it a run for its money.

| More on:

IoT, or Internet of Things, is the concept of communicating with and between multiple devices or things that have historically lacked any connectivity. That connectivity is used to accomplish what are otherwise mundane tasks and, in theory, make our lives easier. Some examples of popular IoT scenarios that were unheard of just a few years ago include having your vehicle message you about an issue, such as low tire pressure or a window being left open when rain is in the forecast, and more intriguing uses, such as controlling your lights and electronics via voice control.

Two of the biggest companies leading the charge in this area are BlackBerry (TSX:BB)(NYSE:BB) and Sierra Wireless (TSX:SW)(NASDAQ:SWIR), but which of these two represents the better investment at this point?

Let’s take a look at both and try to answer that question.

The case for BlackBerry

BlackBerry is the stock everyone loved to hate. After losing a commanding market share to both iOS and Android devices, BlackBerry adopted Android, stopped developing hardware directly, and turned its focus to supporting its enterprise clients, security, and working on a variety of IoT product concepts, including BlackBerry’s asset-tracking system, BlackBerry Radar, and QNX — the highly modular, scalable, and secure operating system that the company hopes to one day power the autonomous driving market.

To the unsuspecting investor, that’s a tall order to fill, especially considering the number of Silicon Valley tech companies that are all vying for that same goal, but BlackBerry has a major advantage or two over its peers.

QNX has an established history of providing a stable and secure operating system for a myriad of different segments of the economy, from the aerospace industry and medical equipment to nuclear power plants and mission-critical infrastructure systems around the world. Also noteworthy is the fact that QNX is already installed in over 120 million vehicles around the world, powering the infotainment systems.

BlackBerry announced results recently that may have finally silenced its critics. Revenue in the most recent quarter hit US$210 million, representing a drop over the US$238 million reported in the same quarter last year. That drop in revenue was more than made up for by the impressive 126% improvement in net income, which topped $43 million in the quarter. A key component of BlackBerry’s drive to success has been a razor-like focus on software and services, which now accounts for the bulk of BlackBerry’s revenue and is over 80% recurring.

The case for Sierra

In recent years, Sierra Wireless has become a pure-play IoT company that just screams of long-term potential. The company develops the embedded modules and modems required for all the “things” to connect to the internet. That’s an important piece of any IoT solution, and as one of the largest and most well-known companies in the field, Sierra has a massive advantage over would-be competitors.

In addition to its pure-play IoT-focused modules for otherwise dumb devices, Sierra’s modems can be found in a massive number of products, encompassing nearly all areas of the market from automotive to cellular manufacturers. The cellular market in particular poses as yet another massive long-term growth option for the company, as the highly touted adoption of 5G networks, are slated to begin rolling out in some areas before the end of the year. Besides being reliant on Sierra’s technology to achieve 5G speeds, the faster network that 5G brings will translate into greater possibilities for IoT devices to consume and transmit data at an increased speed.

Bottom line: Where should you invest?

Both companies represent intriguing options for long-term tech investors, but investors looking for more immediate gains should consider Sierra. The upcoming 5G transition as well as the continued advancement of IoT devices will continue providing growth for the company, and with the stock down nearly 10% over the course of the past calendar year, there could be a window of opportunity.

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 Demetris Afxentiou has no position in any stocks mentioned. BlackBerry is a recommendation of Stock Advisor Canada. David Gardner owns shares of Sierra Wireless. The Motley Fool owns shares of BlackBerry and Sierra Wireless.

More on Tech Stocks

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 »

Snowflake logo in snowflake office on wall_snowflake-1
Tech Stocks

Here’s Why Snowflake Stock Skyrocketed Today

Shares of the data company are up 32% for the day.

Read more »

man touching magnifying glass button on floating search bar internet google search engine
Tech Stocks

Why Alphabet Stock Was Sliding Today

The parent company of Google is facing heat from U.S. regulators.

Read more »

chart reflected in eyeglass lenses
Tech Stocks

Top Canadian AI Stocks to Watch in 2025

Celestica (TSX:CLS) stock and another Canadian AI stock are worth watching closely this holiday season.

Read more »

Nvidia Voyager Headquarters
Tech Stocks

Why Nvidia Stock Rallied (Again) on Tuesday

The chipmaker is expected to report earnings this evening.

Read more »