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Canada-based Internet of Things (IoT) solutions provider shares Sierra Wireless (TSX:SW) (NASDAQ:SWIR) is up more than 100% in the past 12 months and is up 83% so far, easily outpacing the broader markets. In 2022, shares of many technology stocks, including Canadian stocks ShopifyAnd the It’s down 75% from its all-time high.
Now with a market capitalization of $1.6 billion, can Sierra Wireless continue to reap huge gains for investors?
Why Sierra Wireless Stock Soared in 2022
Sierra Wireless aims to bring together cutting-edge hardware, connectivity services, and its cloud platform to provide a broad range of integrated, enterprise-facing IoT solutions. These edge-to-cloud solutions consist of embedded devices and unified networks with network connectivity services.
Sierra’s suite of solutions allow businesses to improve operational efficiencies, thereby creating improved customer experiences as well as additional revenue streams.
Due to strong demand for its products, Sierra revenue in the second quarter (Q2) increased 41.5% year over year to $188 million. Furthermore, the technology stock swung to adjusted net income of $16.7 million, or $0.43 per share, in the June quarter compared to a loss of $1.1 million, or $0.03 per share, in the same period last year.
Sierra Wireless easily exceeded the Bay Street consensus estimates this quarter due to strong customer demand for its 5G modules and its expanding product portfolio. Its revenue and profit increased at a rapid pace in the first two quarters of 2022, despite the chip shortage plaguing the global semiconductor industry.
Sierra also boosted production capacity in the fourth quarter of 2021, allowing the company to manufacture additional routers and gateways. She stressed that the procurement team can secure enough raw materials to meet customer demand.
Sierra Wireless also claimed that the flow of orders for its products is resilient, with a significant delay in orders for 2023. Indeed, during the first-quarter earnings call, CEO Phil Brace claimed that the order backlog was well beyond what Sierra Wireless could meet. , indicating that revenue growth should remain strong.
What’s next for stocks and investors in Sierra Wireless?
Global demand for IoT connectivity solutions is expected to grow by 21% annually through 2026, which should drive Sierra Wireless’s top-line growth even higher. Analysts expect Sierra Wireless to increase revenue from $602 million in 2021 to $1 billion in 2023. By comparison, its net profit is expected to improve from a loss of $1.04 per share to adjusted earnings of $1.81 per share in this year. Period.
Therefore, the stock is valued at 1.2 times 2023 sales and a forward-earnings multiple of 20, which is perfectly reasonable.
We can see that the Sierra Wireless is part of a rapidly expanding market. Despite huge gains in 2022, the stock is also trading at an attractive valuation.
Last month, a Bloomberg report said Semtech is in advanced talks to acquire Sierra Wireless. Semtech is a US-based chip manufacturer that works in the field of Internet of Things devices. Semtech ended the June quarter with long-term debt and approximately $500 million in cash and short-term investments.
Sierra Wireless soon confirmed that it had entered into a definitive acquisition agreement with Semtech. Under this agreement, Sierra Wireless shareholders will receive $31 in cash per share. At the moment, the share price is $30.74.