The internet changed our world, connecting our computers across distances, brought us email and bulletin boards and instant messaging and social media. Websites, internet marketing, and search engines are a part of everyday life now.
And in recent years, the concept of the internet has been expanding, moving into the physical world. The Internet of Things (IoT), networks of connected physical devices, is altering industries in ways that we are only beginning to imagine. From robots on the factory floor, to smart homes controlled from the smart phone in your pocket, for the most part there is no telling what’s coming next.
For the most part. Because one thing is certain: the companies that contribute to the Internet of Things are going to reap the benefits, as will the investors who get in early. And there is plenty of potential in IoT; according to the market research agency Mordor Intelligence, the IoT market was worth 761.4 billion in 2020 – and is headed up a quick pace, expected to reach $1.37 trillion in the next five years.
This kind of growth is going to present opportunities, and we’ve used the TipRanks platform to look up two IoT companies whose stock shares look primed for gains in that environment. These are Strong Buy stocks, with double-digit upside potentials even after recent strong gains. Here are the details, fleshed out with commentary from Wall Street’s analysts.
IMPINJ, Inc. (PI)
First on our list, IMPINJ, is a leader in radio frequency identification technology, an essential core component of the IoT. IMPINJ pioneered RAIN RFID tech, and now uses it to power links between everyday items – including pharmaceuticals and medical supplies, documents, automotive parts, and even apparel, shoes, jewelry, and food. If it can be connected, IMPINJ can find – and make – the connection.
The company offers customers both a full line of RAIN RFID chips and software, and a connectivity platform, operating the IoT from all angles. Using IMPINJ’s platform, customers can create wireless connectivity between everyday items; use the tech to identify, locate, and protect those connected items; and retrieve and deliver network data. The system’s applications to asset management, inventory management, and shipment verification have game-changing promise.
Last month, IMPINJ announced the launch of three new E-series RAIN RFID chip products, offering higher capacity to meet demand in logistics, supply chains, and consumer electronics. The new chips are higher performing on lower power consumption, for better performance on battery-equipped devices, and come with easy-to-use integration tools.
At the end of April, IMPINJ reported its 1Q21 earnings results. At the top line, the revenue of $45.2 million was down 5.4% year-over-year, and the EPS net loss, of 40 cents, was near double the 19 cents reported in 1Q20, although both results were better than what the analysts were projecting. And even though the yoy results showed a deepening loss, both revenue and EPS showed substantial sequential improvements from Q4, and marked the third consecutive quarter of such sequential gains.
Watching IMPINJ for Colliers Securities, analyst Derek Soderberg sees the company “coming out of COVID-19 with accelerating growth and market share gains,” and further writes, “We are optimistic about the outlook this year given commentary around visibility into both supply and demand for 2H21… We also acknowledge that the Impinj management has impressed us setting reasonable expectations as well as through their management of the business throughout a volatile 2020. Additionally, we are encouraged by the strengthening demand environment, progress in new RAIN use cases, and the anticipated ramp in supply chain and logistics.”
In line with his view, Soderberg rates PI shares as a Buy, while the $82 price target implies a robust 62% one-year upside potential. (To watch Soderberg’s track record, click here.)
IMPINJ’s Strong Buy consensus rating shows a unanimous opinion from the Wall Street analysts – it is based on 3 recent positive reviews. The stock is trading for $50.51 and the $74.33 average price target suggests it has room for 47% upside in the year ahead. (See IMPINJ’s stock analysis at TipRanks.)
Itron, Inc. (ITRI)
The second company we’re looking at, Itron, bring Internet of Things connectivity to the utility industry. The company works with gas, electric, and water utilities, along with ‘smart city’ municipal systems, to streamline operations, ease meter readings, and provide data analytics and distribution automation – and those are only a few of the services and capabilities that Itron offers. Itron has thousands of business customers in more than 100 countries.
The company’s product catalog includes all aspects of its IoT universe, from the hardware – utility meters, modules, and sensors – to the network and communications devices – for automation, meter management and reading, and ‘smart city’ systems – to the software – for analysis, services, and smart payments.
In the second quarter of this year, Itron has demonstrated both customer retention and growth. In the retention end, the company announced a two-year contract extension with the Southern Maryland Electric Cooperative, a major electric cooperative in the US, with more than 169,000 customer accounts. The company also recently announced three new business moves, including a new grid-interactive water heater program in Fort Collins, Colorado, that will serve 75,000 customers; a contract with United Utilities in England, to deploy cloud-based meter management; and a collaboration with Microsoft for a new round of performance and scalability testing of the Itron Enterprise Edition Meter Data Management product.
Itron is also working with Germany’s digimondo, an IoT software company, to develop a flexible, independent connection that will monitor and manage water distribution networks via LoRaWAN in that country.
Earlier this year, for Q1, Itron reported its first quarter results. At the top line, revenue was down – from $598 million last year to $520 in this year’s first quarter. At the same time, EPS rose from 21 cents in the year-ago quarter to 30 cents in 1Q21. In other positive metrics, the company’s free cash flow improved from $6 million last year to $39 million as of March 31, 2021; the total backlog – a measure of how much work the company has on the ‘back burner,’ and how much business it will have in the near future – rose from $3 billion to $3.4 billion; and gross margins grew from 28% to 32%.
5-star analyst Jonathan Dorsheimer covers this stock for Canaccord Genuity, and he is impressed with what he sees. Dorsheimer writes of Itron’s recent quarterly report and path forward, “We believe these results provide a glimpse into the company’s asset light strategy. Specifically, gross margin expansion reflected the stronger sales mix of higher margin businesses like Networks and Outcomes, and suppressed sales of lower margin business of hardware and devices…. The ERCOT failure in Texas has forced a fundamental shift in thinking around dynamic pricing of electricity and load management, with an influx of renewables into grid. This will continue to be a tailwind for Itron’s demand response business and was reflected in their backlog that reached a new record of $3.4B.”
The analyst has a $126 price target on ITRI stock, to go along with his Buy rating, suggesting a 28% upside in the next 12 months. (To watch Dorsheimer’s track record, click here.)
Again, we’re looking at a stock with a unanimous analyst consensus behind its Strong Buy rating; all 7 of the recent reviews have recommended a Buy on this one. ITRI has an average price target of $115.33 and a share price of $98.33, giving the stock an upside of 17% in the coming year. (See Itron’s stock analysis at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
