Why I'm Bullish on Sierra Wireless
The Internet of Things bubble has burst as many companies that were targeting this market have lost a lot of value over the last few quarters. That being said, I think stocks like Sierra Wireless (SWIR) look undervalued as Internet of Things market is still an opportunity for the company going forward. This makes the stock a good contrarian buy going forward.
Prospects in the Internet of things market
The Internet of things has been known about for quite some time now. It is basically the connection of every appliance, device, equipment, tool etc. to the internet which could connect these things to one another.
At present, the internet of things is not easily applicable to the daily lives of common people. It has huge potential but right now the only people that can afford the high levels of lifestyle connectivity are the very wealthy. For example, the costs of internet connected light bulbs made by companies like GE and Phillips are too high for the average consumer. Thus, the products of Sierra Wireless are in the early phases of the product adoption curve i.e. the innovators and the early adopters are only ready to buy them.
But as noted above, the benefits are huge. The advantage for Sierra Wireless is that be it cars, industry, office or home, its internet modules or the chips are going to be in demand irrespective of the products in and out of demand. Sierra is the world's top manufacturer of 2G, 3G, and 4G LTE embedded modules and gateways. If every device is going to be connected to the Internet, it needs these tiny modules that allow devices to receive and transfer data. Sierra is one of the best at making these, so its growth potential is significant.
Also, in future, the applications of the internet of things are going to get less and less expensive making the middle-income consumers to invest in these systems. Sierra Wireless is a pure-play Internet of Things company. And because in the coming years this is going to be a huge industry, Sierra’s products have very bright future prospects.
Although Internet of Things was a bubble once, I think stocks like Sierra Wireless are fairly valued now and make for a good contrarian pick. Due to the factors mentioned above, I think Sierra Wireless can offer nice upside in the future.