Adesto Technologies Corp: Up 100% This Year but More to Come

Adesto Technologies Corp (NASDAQIOTS) Up 100% in 2019 but More to Come
iStock.com/NatalyaBurova

Adesto Technologies Stock: Why Its Surge Is Only the Start 

The future of technology will be driven by several key areas, including the cloud and the Internet of Things (IoT). The technologies encompass the rapid use of artificial intelligence and machine learning, which will power companies like Adesto Technologies Corp (NASDAQ:IOTS).

The IoT segment comprises technologies that enable devices to communicate with each other in an ecosystem.

For a small, rapidly growing IoT company like Adesto, the tailwinds are extremely strong.

IOTS stock is up 101% this year, trading at a record $11.97 in August prior to declining to the current sideways channel around $9.00, where I see an aggressive opportunity.

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Chart courtesy of StockCharts.com

Adesto Technologies Corp develops advanced low-energy-consumption semiconductors used in IoT applications. The company’s proprietary memory products are found in industrial, consumer, medical, and communications applications.

Since IoT applications demand low power consumption, Adesto appears ripe to benefit from this, and this is reflected in the company’s strong fundamentals.

My Bull Case for IOTS Stock 

Adesto Technologies Corp’s revenue picture was not pretty from 2014 to 2016, prior to recording two strong years of growth in 2017 and 2018.

Fiscal Year Revenues (Millions) Growth
2014 $41.5
2015 $43.3 4.3%
2016 $44.0 1.6%
2017 $56.1 27.6%
2018 $83.5 48.8%

(Source: “Adesto Technologies,” MarketWatch, last accessed October 31, 2019.)

Adesto is estimated to continue to ramp up its revenues by an impressive 51.1% to $125.0 million this year, before moderating to 18.5% growth to $149.5 million in 2020. (Source: “Adesto Technologies Corporation (IOTS),” Yahoo! Finance, last accessed October 31, 2019.)

There is a high estimate of $162.1 million for 2020, giving Adesto Technologies stock a forward revenue multiple of only 1.6 times the high estimate.

So far, Adesto has yet to turn an earnings-per-share (EPS) profit on both a generally accepted accounting principles (GAAP) or adjusted basis, but it’s coming.

Fiscal Year GAAP Diluted EPS Growth
2014 -$0.58
2015 -$2.79 -385.1%
2016 -0.77 72.4%
2017 -$0.31 60.3%
2018 -$0.85 -178.7%

(Source: MarketWatch, op. cit.)

After five straight years of losses, Adesto Technologies could earn an adjusted $0.05 per diluted share this year and an adjusted $0.46 per diluted share in 2020. (Source: Yahoo! Finance, op. cit.)

IOTS appears on its way to profitability this year after beating the EPS consensus estimate in the last four consecutive quarters.

Analyst Take

Adesto Technologies Corp has a small market cap of around $274.0 million, but that hasn’t stopped institutional investors from investing. Around 81 institutions hold 72.5% of the outstanding shares of IOTS stock. (Source: Yahoo! Finance, op. cit.)

The outlook for Adesto is positive, given the strong demand for IoT technologies.

Adesto Technologies stock is already up 101% this year, but there is more to come, given that the stock trades at a reasonable 19 times its high EPS estimate for 2020.