When you say the Internet of Things (IoT) you may get different responses. I like to think of it broadly as being about connection. It’s about devices that can connect with each other, and with the internet. And this provides users with the solutions that are making our lives more convenient.
The most basic, and ubiquitous, example of an IoT device is the smartphone that many of us have with us at all times. But think about what that has led to. Home assistants, security cameras, fitness apps, and so much more are all enabled by the internet of things.
IoT took on even more importance in the pandemic as businesses had to find a way to ensure the security and viability of their networks even as their employees were scattered remotely. This created demand for edge and cloud computing solutions that are also facilitated by the internet of things.
And yes, this is just the start. The need for more and more data is powering demand for IoT solution in areas such as autonomous vehicles.
But the good news is that this is an area that is still very much in its growth phase. And that means there is no lack of companies that you can find to trade in this sector. To help you get started, we’ve put together this special presentation that highlights seven such companies and the reasons why we believe they merit adding to your portfolio.
Quick Links
- Apple
- Qualcomm
- Intel
- Nvidia
- DexCom
- Roku
- Alarm.com
#1 - Apple (NASDAQ:AAPL)
The first of the IoT stocks to consider is Apple (NASDAQ:AAPL). One reason to consider Apple is its ecosystem. The company has a loyal, committed user base that goes beyond its iconic iPhone to include the Apple Watch and AirPods. Because of this, Apple is as close as any company with the exception of Amazon (NASDAQ:AMZN) as having all the pieces needed to normalize a “smart home” with devices from a single brand.
That would be enough to put Apple on this list. But the company has big plans to move into the healthcare space. The company has recently launched its Apple Health Records project. The purpose of this project is to monitor patients and keep track of their health in real-time by integrating various Apple products.
Right now this initiative is in its early stages. The company is partnering with several university medical centers most notably Duke and Stanford. However, Apple has big plans for expanding its healthcare reach. Given the company’s track record that would appear to be a good bet. Plus, you can get APPL stock for a nice discount compared to where it was trading in January.
About Apple
Apple Inc designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
Read More - Current Price
- $254.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $236.78 (7.0% Downside)
#2 - Qualcomm (NASDAQ:QCOM)
A year ago, I wouldn’t have been quite as sold on Qualcomm (NASDAQ:QCOM). The company was mired in a legal dispute with Apple. At stake was Qualcomm’s role as chip provider for the iPhone. However, the two sides managed to reach a multi-year agreement that, for now, leaves Qualcomm as the sole provider of chips for the iPhone.
At some point, Qualcomm’s partnership with Apple may end. And there’s no question that smartphones are one of the key devices in a connected future. However, Qualcomm also does business across other areas of the IoT sphere. For example, late in 2020 the company announced a partnership with DISH Network (NASDAQ:DISH) to help them develop their O-RAN compliant 5G network. The build-out of a 5G infrastructure will remain a catalyst in this sector for years to come.
At the time of this writing, QCOM was trading at a significant discount to the 12-month price target laid out by analysts. The stock is also down about 12% for the year and pays a dividend with a yield of right around 2%.
About QUALCOMM
QUALCOMM Incorporated engages in the development and commercialization of foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies for use in wireless voice and data communications, networking, computing, multimedia, and position location products.
Read More - Current Price
- $152.89
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 14 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $208.00 (36.0% Upside)
#3 - Intel (NASDAQ:INTC)
Like Qualcomm, Intel (NASDAQ:INTC) has many ways to benefit from the emergence of the internet of things. Some of the company’s initiatives, for example in the area of autonomous vehicles, will not come to fruition for several years. However, Intel is also a key player in such areas as edge computing, data centers and drones. Plus, the company has applications in key fields that will always drive the economy such as banking, education and healthcare.
If you bought shares of INTC stock last year, you know it’s been a volatile time for the company. It’s never a good thing for a chipmaker to have a defect in your next generation of chips. Intel has paid the price for this.
However, since the beginning of the year, the stock is having a nice upswing of nearly 20%. And shares are a trading at price/earnings ratio of under 12 which makes this a good value in the sector.
About Intel
Intel Corporation designs, develops, manufactures, markets, and sells computing and related products and services worldwide. It operates through Client Computing Group, Data Center and AI, Network and Edge, Mobileye, and Intel Foundry Services segments. The company's products portfolio comprises central processing units and chipsets, system-on-chips (SoCs), and multichip packages; mobile and desktop processors; hardware products comprising graphics processing units (GPUs), domain-specific accelerators, and field programmable gate arrays (FPGAs); and memory and storage, connectivity and networking, and other semiconductor products.
Read More - Current Price
- $19.52
- Consensus Rating
- Reduce
- Ratings Breakdown
- 1 Buy Ratings, 25 Hold Ratings, 5 Sell Ratings.
- Consensus Price Target
- $30.04 (53.9% Upside)
#4 - Nvidia (NASDAQ:NVDA)
The last of the chipmakers I’ve put on this list is Nvidia (NASDAQ:NVDA). This is a company that is having no problem meeting expectations. Nvidia just delivered an earnings report that saw it beat expectations for both revenue and earnings per share. INTC stock is up 77% in the last 12 months, but it has taken an 8% drop in the last month.
However, based on the company’s earnings report, this appears to be nothing more than Nvidia being caught up in the overall selloff going on with tech stocks.
The company benefited from the pandemic as the shift to working from home expanded demand for the company’s graphic processing units (GPUs). And being at home also stirred demand among gamers for GPUs that could deliver the speed and performance they needed. Early in 2021, the company is benefiting from renewed demand in cryptocurrency mining via its GPUs.
But where investors should really be paying attention is in Nvidia’s role in helping plan out “smart cities.” This is still an emerging sector of the IoT market, but it’s projected to take on much more significance in the coming years.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $134.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $164.15 (21.9% Upside)
#5 - DexCom (NASDAQ:DXCM)
Some parts of the internet of things may feel superfluous. Yes, it’s the role of technology to provide solutions that make our life easier. However, at times, it gives us solutions for problems we never really needed to be solved. DexCom (NASDAQ:DXCM) is in the former category and was an easy choice for this list.
What you need to know about DexCom is that they operate in a distinct niche. However, it’s a niche that has a large addressable market. The company provides a glucose monitoring app for diabetics.
One of the daily challenges that diabetics face is the need to monitor their blood sugar. This is typically done by pricking their finger, sometimes as many as seven times a day. DexCom’s app-based tool automatically monitors blood sugar levels with no fingersticks. The system uses an implantable sensor that connects to a smartphone or watch. This allows users to check their levels at any moment.
DXCM stock is up 28% in the last 12 months with analysts giving the stock a nearly 20% upside in the next 12 months.
About DexCom
DexCom, Inc, a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally. The company provides its systems for use by people with diabetes, as well as for use by healthcare providers. Its products include Dexcom G6 and Dexcom G7, integrated CGM systems for diabetes management; Dexcom Share, a remote monitoring system; Dexcom Real-Time API, which enables authorized third-party software developers to integrate real-time CGM data into their digital health apps and devices; and Dexcom ONE, that is designed to replace finger stick blood glucose testing for diabetes treatment decisions.
Read More - Current Price
- $80.04
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $98.00 (22.4% Upside)
#6 - Roku (NASDAQ:ROKU)
Roku (NASDAQ:ROKU) is not a pure-play IoT stock. Nevertheless, it’s well worth your consideration, especially for those looking for stocks to hold over the long haul. The reason is this. There are a lot of companies that are competing in the streaming wars. But if consumers have a Roku TV or Roku stick, the company benefits no matter which one of the streaming services the user chooses.
Roku is the leader in this over-the-top (OTT) media sector. In fact, they currently claim about 40% of the market. And their market share is likely to increase even as the pandemic ends.
And Roku is not settling for hosting other carriers content. The company is beginning to produce its own original content for its Roku channel. This will give users another option if they simply can’t find anything to watch on Netflix (NASDAQ:NFLX).
ROKU stock is up 232% in the last 12 months and is up 15% year to date.
About Roku
Roku, Inc, together with its subsidiaries, operates a TV streaming platform in the United states and internationally. The company operates in two segments, Platform and Devices. Its streaming platform allows users to find and access TV shows, movies, news, sports, and others. The Platform segment offers digital advertising, including direct and programmatic video advertising, media and entertainment promotional spending, and related services; and streaming services distribution, such as subscription and transaction revenue shares, and sale of premium subscriptions and branded app buttons on remote controls.
Read More - Current Price
- $80.59
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 9 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $83.81 (4.0% Upside)
#7 - Alarm.com (NASDAQ:ALRM)
The last stock on our list is perhaps the stock that illustrates the benefits of the IoT sector the best. Alarm.com (NASDAQ:ALRM) is seeking to become the leader in home security solutions. The company currently sells devices such as security cameras and locks. And it also provides the cloud software that connects them. And since users can engage with all of this through their smartphone, the company creates a complete closed-loop home security system.
And what investors love about Alarm.com’s business model is that it is a software-as-a-service (SaaS) company. That means it generates consistent and increasing revenue from subscriptions. The company is forecasting an annual growth rate in the sector of at least 24%. That should drive up the number of subscriptions. And as subscriptions rise so will the company’s cash position that is already allowing it to expand and invest in other technologies.
ALRM stock is up 86% in the last 12 months. However, the stock is down nearly 14% year-to-date which could create a great buying opportunity.
About Alarm.com
Alarm.com Holdings, Inc provides various Internet of Things (IoT) and solutions for residential, multi-family, small business, and enterprise commercial markets in North America and internationally. The company operates through two segments, Alarm.com and Other. It offers solutions to control and monitor security systems, as well as to IoT devices, including door locks, garage doors, thermostats, and video cameras; and video monitoring and analytics solutions, such as video analytics, escalated events, video doorbells, intelligent integration, live streaming, secure cloud storage, and video alerts.
Read More - Current Price
- $62.95
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 3 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $64.40 (2.3% Upside)
As you can see, IoT stocks cover a range of sectors and have many applications. “Connection” covers a lot of territories.
If I wanted to look at this from a contrarian angle, I might think that the world will be looking for more human interaction after the pandemic ends. I think that may very well be true, but it will still be facilitated by technology. And some ripple effects, such as the need for retailers to have an omnichannel selling model will stick around. Plus, the smart homes many individuals live in will sooner than we imagine turn into smart cities.
So I can’t get on board with IoT stocks being a post-pandemic loser. In fact, these stocks are likely to continue to gain steam as we look for ways to make our lives safer, more secure, and more streamlined. Investing in any of the stocks in this presentation would be a good place to start.
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