The “Internet of Things” isn’t just a new catchphrase that will eventually become as unnecessary and tiresome as “Y2K”. The Internet of Things is about an interconnected world. And thanks to the Internet, it’s quickly becoming a reality. There is a large number of Internet of Things companies that will, and are, capitalizing on this lucrative, trillion-dollar industry.
The Internet of Things is upon us, and it is changing the world. No longer the sole realm of science fiction, the Internet of Things is about an interconnected world where mobile devices, smart cars, homes, offices, medical devices, and even parcels can communicate with each other.
And those companies that provide the technology to help the Internet of Things evolve will provide astute investors with significant investing opportunities. For example, according to a recent report, an estimated 50 billion devices will be connected to the Internet by 2020 versus 15 billion today. That’s more than triple the amount of today’s number in less than five years. If you thought increased connectivity was going to slow things down, think again. (Source: chainstoreage.com, April 15, 2015.)
The study also found that growth in the Internet of Things will generate $8.0 trillion in “value at stake” over the next decade. That represents a combination of increased revenue and lower costs created when connections are made. The top five factors driving the Internet of Things include: innovation and revenue; asset utilization; supply chain and logistics; employee productivity improvements; and enhanced customer experience.
That said, the success of the Internet of Things hinges on those brands that can unlock operational efficiencies, make life better, and help us stay connected. Below are five Internet of Things stocks to watch in 2015 and beyond that are making the best use of the aforementioned factors.
Internet of Things Stocks to Watch in 2015
Big names like Google Inc. (NASDAQ/GOOG), Intel Corporation (NASDAQ/INTC), and Cisco Systems, Inc. (NASDAQ/CSCO) will undoubtedly benefit from the Internet of Things. But investors looking for smaller players that could take a bite out of this (for now) niche market may want to do some due diligence on the following five companies.
Linear Technology Corporation (NASDAQ/LLTC)
Linear Technology Corporation was made for the Internet of Things. The company designs, manufactures, and markets a large number of high-performance integrated circuits that help products communicate with each other. The company’s products are used in telecommunications, cellular telephones, networking products, notebook and desktop computers, video/multimedia, industrial instrumentation, automotive electronics, factory automation, process control, and military and space systems.
The company’s share price has been up 73% since the beginning of 2012 and provides investors with an annual dividend of 2.5% or $1.20 per share.
Ambarella, Inc. (NASDAQ/AMBA)
Ambarella, Inc. is a leading developer of low-power, high-definition (HD) and Ultra HD video compression and image processing solutions. The company’s products are used in a variety of professional and consumer applications; including security IP-cameras, sports cameras, wearable cameras, flying cameras, and automotive video processing solutions. Ambarella compression chips are also used in broadcasting TV programs worldwide.
Between 2010 and 2012, Ambarella was the recipient of the Global Semiconductor Alliance (GSA) award for “Most Respected Private Semiconductor Company.” Ambarella became a public company in 2012 and has since received the GSA 2013 award for “Favorite Analyst Semiconductor Company” and GSA 2014 award for “Most Respected Emerging Public Semiconductor Company.”
Since going public in October 2012, Ambarella’s share price has soared more than 1,400%. Currently trading near $91.50, Ambarella’s share price has been up 75% since the beginning of January.
Flextronics International Ltd. (NASDAQ/FLEX)
Flextronics International Ltd. assembles components needed in the Internet of Things. The company is an industry leader with $26.0 billion in sales, generated by helping customers design and build products in a wide range of industries, including data networking, telecom, enterprise computing and storage, industrial, capital equipment, appliances, automation, medical, automotive, aerospace and defense, energy, mobile, computing and other electronic products.
Some of the company’s customers include Apple, Cisco, Ericsson, HP, Huawei, Lenovo, Microsoft, BlackBerry, and Xerox.
Nimble Storage, Inc. (NYSE/NMBL)
Nimble Storage, Inc.’s share price has been underwhelming since IPOing in December 2013. That said, Nimble’s technology has tremendous long-term Internet of Things applications.
The company provides a hybrid storage system that combines the features of both flash and disk drives. This allows for faster loading of applications and significantly reduces the cost of the storage system.
In the first quarter, Nimble announced continued success in customer acquisition with 542 new customers, or 5,521 total customers. On top of that, the number of large deals ($100K plus) grew at a record 142% year-over-year. (Source: Nimble Storage, Inc., May 26, 2015.)
Total revenue increased 53% to $71.3 million. Excluding fluctuations in foreign currency, revenues would have been $73.4 million. Non-GAAP gross margin for the first quarter of fiscal 2016 was 67.6% compared to 66.2% in the first quarter of fiscal 2015.
Red Hat, Inc. (NYSE/RHT)
Every product on the Internet of Things needs to run software in order to connect with a server and deliver real-time data. Companies that provide open-source operating systems that are secure, easily managed, and affordable will be early winners.
Red Hat, Inc. does all that and more. The company dominates the market for “Linux,” the open-source operating system that is the chief rival of Microsoft’s “Windows.” In addition to “Red Hat Enterprise Linux OS,” the company’s product line includes database, content, and collaboration management applications; server and embedded operating systems; and software development tools.