ORBCOMM Set to Power Ahead in the IoT Space
You have all heard about the staggering developments in the growth of artificial intelligence (AI) powering the Internet of Things (IoT). While the media constantly focuses on the major players, there are numerous smaller IoT participants that are working on next-generation technological solutions, such as small-cap ORBCOMM Inc (NASDAQ:ORBC).
ORBCOMM stock has yet to find its bull legs, but the chart indicates that a big move could be in the works. ORBC stock is up 13.28% over the past 52 weeks, slightly underperforming the S&P 500 but reaching a multi-year high of $11.47 on June 14.
What makes ORBCOMM an intriguing high-potential IoT play is the company’s consistent revenue growth and move towards profitability, which support the bull thesis.
The IoT space encompasses both hardware and software that enable devices to communicate with each other. The most widely talked-about use is in the autonomous vehicle space, but there are many applications for which IoT technologies will be adopted.
The IoT market is over $100.0 million and could grow to $1.0 trillion within the next five years if you believe in the growth projections. Based on what is currently happening in the IoT space, it wouldn’t be a stretch to imagine these lofty views.
ORBCOMM is a company that has excellent prospects for growth. The company is a developer of IoT and machine-to-machine (M2M) communications hardware and software solutions used to track and monitor fixed and mobile assets wherever they may be situated in the world.
At the core of ORBCOMM’s business is its commercial satellite network used to run its M2M offering. The network enables global companies with assets worldwide to manage their assets.
The Fundamental Bull Case for ORBC Stock
Revenues have increased sequentially in three consecutive years from $74.21 million in 2013 to $186.74 million in 2016, including massive growth of 85.4% in 2015.
The three-year compound annual growth rate (CAGR) for revenues was 36%, which was skewed by the growth in 2015. Growth slowed to 4.7% in 2016, but is slated to pick up at 22.4% to $228.56 million in 2017, followed by 10.3% to $252.05 million in 2018, according to Thomson Reuters. The growth represents higher revisions from the previous 15.1% and six percent for 2017 and 2018, respectively, which is bullish for ORBC stock. (Source: “ORBCOMM Inc. (ORBC),” Yahoo! Finance, last accessed June 22, 2017.)
The next big step for ORBCOMM will be achieving profitability, which looks to be coming in 2019.
The company is narrowing its losses, expected to fall to $0.22 per diluted share in 2017 and to as low as $0.06 per diluted share in 2018.
My thinking is that, once profits are attained, we could see a steady climb in ORBC stock, which means that this may be an opportune time to look at the stock.
We have seen three Wall Street analysts recently increase their earnings per share (EPS) estimates for 2018. This is a bullish sign that supports a potential rise in the ORBC stock price.
Chart Suggests Breakout to Over $17
ORBCOMM stock has been on a nice uptrend since trading at $1.16 in March 2009, mirroring the rise in the stock market.
Chart courtesy of StockCharts.com
We saw a major breakout of ORBC stock at $4.00 in January 2013. The stock continues to hold the 50-day and 200-day moving averages.
Chart courtesy of StockCharts.com
The charts indicate a potential bigger move towards $13.00 and the $17.00 level last encountered in June 2007.
If the IoT market grows to be as big as projected, we could be in the early stages of major breakout for ORBCOMM stock over the next few years.