3 IoT Stocks to Consider in 2019

3 IoT Stocks to Consider in 2019
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Best IoT Stocks for 2019

2019 may be the year that all the hype surrounding the “Internet of Things” (IoT) becomes a reality. And all the IoT stocks will have to start proving they’re everything they’ve been telling investors they are. That said, technology stocks are always evolving, and the best IoT stocks in 2019 may not be the ones to watch in 2020. Still, there are plenty of excellent medium- and large-cap IoT stocks that should do well in 2019 and over the next decade.

What Is the Internet of Things?

The tech industry is famous for coming up with terminology that sounds as if it’s going to take over the world. The Internet of Things is just that. Except, the IoT is indeed going to be a massive technological force that will transform the tech industry in ways we don’t fully understand yet.

The IoT is the idea that any device can connect with the Internet or each other. This includes everything from cell phones, washing machines, and cars to coffee makers, lamps, and wearable devices. The Internet of Things will connect people to people, people to things, and things to things.

According to analyst firm Gartner Inc (NYSE:IT), there will be over 20 billion connected devices by 2020 as we move toward a fully automated world. (Source: “Gartner Says 8.4 Billion Connected “Things” Will Be in Use in 2017, Up 31 Percent From 2016,” Gartner, February 7, 2017.)

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And this interconnectedness is going to impact the global economy on a massive scale. A report from Cisco Systems, Inc. (NASDAQ:CSCO) suggests the IoT will generate $14.4 trillion in value over the next decade (2013–2022). That white paper is a little old. The impact IoT will have between now and 2030 is, for now, immeasurable. (Source: “Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion,” Cisco Systems, Inc., last accessed January 30, 2019.)

What’s Been Holding the IoT Back?

What’s been holding the IoT back? Download and upload data speeds.

5G is the next generation of mobile broadband that is transforming the tech industry. One of the most exciting features is the data transfer speeds that 5G offers; tens of megabits per second to tens of thousands of users.

On a practical level, download speeds could be up to 1,000 times faster than 4G. This would allow you to download an entire HD movie in less than a second. Even the most conservative figures put 5G light years ahead of 4G.

Network Download Speeds
3G 384 Kbps
4G 100 Mbps
5G 1-10+ Gbps

What about upload speeds? Uploading is always slower than downloading, but with 5G, it’s still superfast, with some estimates pegging it as fast as 10 Gbps. This is important because the closer that download and upload speeds are, the less latency there is between the two.

Latency is the length of time it takes a network to respond to your request. For example, playing a video or loading a web site. The network has to respond to your request before it can take any action. Getting that lag time down to essentially nothing is the holy grail of networking.

Over 3G networks, the response time is roughly 120 milliseconds. On 4G, it is between 15 and 60 milliseconds. That may not sound like a long time if you’re loading a web site, but it is if you’re a doctor performing surgery remotely or you want your car to respond to an emergency.

A 5G response time of just one millisecond is virtually unnoticeable and would make the IoT a reality.

Some of the biggest real-world applications for the IoT includes smart homes, connected cars, wearables, industrial IoT devices (brilliant machines that communicate through data), smart cities, agriculture, retail, energy, healthcare, and farming.

There are endless opportunities when it comes to the IoT and devices being connected to one another and things. Suffice it to say, the IoT is really in its infancy and it’s difficult to really comprehend the impact it will have on us in five or 10 years.

It’s also not hard to see that the IoT will open the doors of opportunity for any number of tech stocks. Below are some of the top IoT stocks for 2019.

Top IoT Stocks for 2019

Company Stock Symbol
QUALCOMM, Inc. NASDAQ:QCOM
Marvell Technology Group Ltd. NASDAQ:MRVL
Sierra Wireless, Inc. NASDAQ:SWIR

Qualcomm Stock

QUALCOMM, Inc. (NASDAQ:QCOM) is a well-known chip maker that will have its “X50” modem, which is designed specifically for 5G technology, in a large number of 5G devices in 2019.

Qualcomm has partnerships with AT&T Inc. (NYSE:T), Alphabet Inc (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), Samsung, and Verizon Communications Inc. (NYSE:VZ).

All of these companies expect to launch their first 5G phones in 2019. On top of that, the company’s new “Snapdragon 8cx” processor, designed specifically for “Windows” 2-in-1s, will help expand it gain a strong foothold in PC computing.

One big concern with IoT stocks is security. With everything being connected, there are fears that devices will be susceptible to cyber attacks. Qualcomm is also a leader in developing security features for consumer and industrial IoT applications.

Should You Consider Qualcomm in 2019?

Qualcomm’s share price took a dive, along with the rest of the market, in October and December 2018. Its share price has not yet recovered; currently trading near $50.00 per share, Qualcomm’s share price is down roughly 32% from its October pre-market sell-off highs.

Because Qualcomm has such a great long-term outlook, this has put the industry giant in a great trading range.

The fact of the matter is, Qualcomm’s 5G technology will be part of the primary infrastructure that makes the IoT a reality. Best of all, the 5G rollout will take place over two waves. The second of which is expected to start in 2020 or 2021; proving Qualcomm’s share price with two years of potential momentum.

Moreover, Qualcomm has invested in more than 120 companies from around the world that focus on IoT, Virtual Reality (VR), Cloud, Mobile, Drones, and Automotive; every area that will benefit from 5G.

Marvell Technology Group Ltd. Stock

Not as big or as well-known as Qualcomm, or many other big tech companies looking to take advantage of the IoT, Marvell Technology Group Ltd. (NASDAQ:MRVL) could surprise investors in 2019.

The Hamilton, Bermuda-based company designs, develops, and supplies mixed-signal and digital signal processing, and integrated circuits. In its own words, “We develop and deliver semiconductor solutions that move, store, process and secure the world’s data faster and more reliably than anyone else.” (Source: “Marvell Blog,” Marvell Technology Group Ltd., November 5, 2018.)

The market forces driving Marvell’s strong growth include the explosion of data and bandwidth demand, need for power efficiency, and end-to-end security. All of that will help it capitalize on the 5G rollout and widespread adoption of the IoT.

The company’s “EZ Connect platform” is used by a large number of global customers in the wearables, automation, automotive, consumer, and industrial industries.

Customers include Microsoft, Google, Hewlett Packard Enterprise Co (NYSE:HPE), Seagate Technology PLC (NASDAQ:STX), Facebook, Inc. (NASDAQ:FB), Intel Corporation (NASDAQ:INTC), Cisco, Ford Motor Company (NYSE:F), Lenovo Group Limited (OTCMKTS:LNVGY), General Motors Company (NYSE:GM), Samsung, and Palo Alto Networks Inc (NYSE:PANW). (Source: “Marvell Investor Day 2018,” Marvell Technology Group Ltd., October 16, 2018.)

Should You Consider Marvell Technology Group in 2019?

Marvell provides chips that will be used in 5G technology, providing it with direct exposure to a large number of IoT markets. The chip maker’s share price took a hit in October and December 2018, but has since rebounded. Currently trading near $18.50, Marvell’s share price is up 16.5% in January. But it is still down roughly 17.5% from its previous highs in summer 2018.

The company reported solid revenue growth and ongoing profitability in fiscal 2019 (ended February 1, 2019). Most recently, revenue for the third quarter (ended November 3, 2018) was up 38% year-over-year at $851.0 million, which exceeded the midpoint of the company’s previous guidance. (Source: “Marvell Technology Group Ltd. Reports Third Quarter Of Fiscal Year 2019 Financial Results,” Marvell Technology Group Ltd., December 4, 2018.)

The company reported a third-quarter net loss from continuing operations of $54.0 million ($0.08 per diluted share). Non-GAAP net income from continuing operations for the third quarter was $222.0 million ($0.33 per diluted share). Cash flow from operations for the third quarter was $299.0 million.

Matt Murphy, Marvell’s President and CEO noted:

Looking ahead, we expect the deployment of 5G will accelerate our growth over the next several years as engagements with a growing list of Tier 1 customers continue to build momentum in this major infrastructure transition.

Sierra Wireless, Inc. Stock

Sierra Wireless, Inc. (NASDAQ:SWIR) is one of the few companies focused exclusively on the IoT. The Richmond, B.C.-based company is an IoT stock pioneer that makes wireless chips and modules used in wearables, connected vehicles, smart cities, etc. (Source: “Company,” Sierra Wireless, Inc., last accessed January 30, 2019.)

The company’s products help things communicate with each other using Bluetooth and cellular signals. In 2017, Sierra was ranked No. 1 in embedded market share…for the sixth year in a row.

Sierra’s wireless modules can be found in:

  • 2 of the top 3 PC & Tablet Makers
  • 3 of the top 5 Automotive OEMs
  • Top 3 Smart Meter Manufacturers
  • 3 of 5 Security Service Providers
  • 4 out of 5 Top 20 Utility Companies
  • 50% of the top 100 Police Departments
  • More than 25% of the top 50 Transit Agency Vehicles
  • 3 out of 4 High-Performance EMS systems

(Source: Ibid.)

Should You Consider Sierra Wireless, Inc. in 2019?

Sierra Wireless is a pure-play IoT stock giving you exposure to one of the most interesting developments to hit the tech industry in years. A leading provider of fully integrated device-to-cloud solutions for the IoT, Sierra’s share price has actually been pretty volatile since the summer of 2017; meaning, it’s been trending steadily downward.

Things were starting to look up for Sierra in the late summer of 2018, but then the market-wide sell-off hit, and any momentum was lost. The December meltdown made it even worse.

Since the start of 2019 though, the company’s share price has been bullish. Trading at roughly $15.55, Sierra’s share price is up 13.5% year-to-date. Admittedly, we’re only at the end of January but things are looking up for Sierra Wireless.

On November 8, 2018, Sierra announced its financial results for the third quarter ended September 30, 2018. Revenue for the third quarter was up 17.9% year-over-year at $203.4 million. (Source: “Sierra Wireless Reports Third Quarter 2018 Results,” Sierra Wireless, Inc., November 8, 2018.)

Net loss was $1.0 million ($0.03 per diluted share) in the third quarter of 2018 compared to net income of $1.4 million ($0.04 per diluted share) in the third quarter of 2017.

Adjusted net income was $10.5 million ($0.29 per diluted share) compared to net earnings of $7.7 million ($0.24 per diluted share) in the third quarter of 2017.

“We had strong growth in revenue and adjusted EBITDA on a year-over-year basis in the Third Quarter,” said Kent Thexton, President and CEO.

We continued to strengthen our position as the leader in Device-to-Cloud IoT solutions and our two highest margin businesses – namely Enterprise Solutions and IoT Services – increased to 27% of total revenue in Q3.

For the fourth quarter of 2018, Sierra expects revenue to be in the range of $200.0 million to $208.0 million. At the midpoint, this represents an 11.1% increase over the $183.5 million recorded in the fourth quarter of 2017.

The company expects fourth-quarter adjusted earnings per share to be in the range of $0.22 to $0.30. In the fourth quarter of 2017, Sierra reported adjusted net income of $0.28 per share.

In addition to growing revenues, Sierra has announced a number of hardware deals with a number of large customers, including Volkswagen, to supply chips for its vehicles. Shipments of those chips will start later in 2019 with revenue coming in in 2019 and 2020. (Source: “Volkswagen prefers Sierra Wireless to enable next-generation connected vehicles with 4G LTE embedded modules,” Sierra Wireless, Inc., February 9, 2017.)

Analyst Take

5G broadband wireless technology is going to revolutionize the IoT. It’s all going to really begin in 2019. And it’s going to transform the way we live and work, including smart homes, banking, medicine, cars, industrial equipment, supply chain management, financial decision making, and improving customer experiences.

Businesses are going to find ways to leverage the IoT across their entire operations.

The fact is, the IoT has the potential to help virtually any company improve their operations. The IoT will also affect our daily lives on a regular basis, from wearables to smart refrigerator to thermostats to lights that turn on when we enter a room to our daily commute.

Again, the IoT is in its infancy; it will grow and evolve, improve the bottom line for businesses and have a positive impact on our day-to-day lives. These three IoT stocks are poised to take advantage of that revolution.