Topic: Growth Stocks

Product development and IoT expansion for Sierra Wireless to spur revenue, earnings

This Canadian leader in the Internet of Things (IoT) saw its sales and earnings drop in the most-recent quarter as the automotive industry suffered through a slowdown. But the company’s new systems coming into production and growing opportunities in 5G wireless technology should generate significant growth in 2019.

The company also continues to spend a high 12% of its revenue on research and development to remain competitive and to gain access into new markets and networks.

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SIERRA WIRELESS (Toronto symbol SW; makes digital components that connect products, including smart electricity meters and vehicles, to the Internet. This is known as machine-to-machine networking, or the “Internet of Things.”

In the three months ended March 31, 2019, Sierra made sales of $173.8 million. That’s down 7.0% from $186.9 million a year earlier (all figures except share price in U.S. dollars). Excluding one-time items, the company lost $854,000, or $0.02 a share. That’s compared to a profit of $3.3 million, or $0.09, a year earlier.

The company faces challenges this year: sales in the automotive industry, a big market for the company, are slowing; and a continuing shortage of Intel chips has hurt the expansion of Internet of Things (IoT) connectivity in the mobile phone market.

Still, as new auto systems come into production in mid-2019, Sierra should profit. As well, IoT connectivity for cloud-based networks (where users access software systems over the Internet) is expanding; new mobile 5G networks should also spur significant growth toward the end of this year.

Growth Stocks: R&D should spur growth into new IoT revenue streams

To remain competitive in these markets, the company continues to spend a high 12% of its revenue on research and development. Sierra also buys firms with technology and products that it can use for its existing business.

Most recently, Sierra’s equipment was certified and approved for use on the U.K.’s Emergency Services Network (ESN). That means public safety agencies can now deploy Sierra Wireless’ AirLink MG90 to connect vehicle fleets on the ESN.

That network serves up to 300,000 individuals and connects up to 50,000 vehicles. Customers for the ESN include police, fire and rescue, and ambulance services.

Sierra Wireless believes that AirLink MG90 will let it win a significant number of bids to supply agencies on the ESN. That’s because AirLink both secures the data it transmits and can provide an overview of an entire fleet through vehicle tracking and collecting driver-specific behavioral data.

Recommendation in Stock Pickers Digest: Sierra Wireless is a buy.


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