After months stuck in a range in between $16 - $17 a share since February, shares of Sierra Wireless (NASDAQ: SWIR) broke out and closed at above $19 last week after reporting an impressive second quarter. The stock now trades at a forward P/E of around 15 times.
Sierra Wireless reported an improving profit margin, thanks to revenue growing 31% in Enterprise Solutions and up 210% for IoT. The company clearly affirmed its growth potential in the IoT connection supplying space. If this pace continues, SWIR stock could regain the $23 - $26 52-week levels this year.
IoT service gross margins topped 41.1%, while Enterprise Solutions was 50%. Sierra Wireless had a record number of design wins in a broad range of IoT markets. Customer activity grew, helped by new customer wins in multiple markets. This is good for the investor because it reduces risks of a downturn in any one sector. The company won customers in industrial, energy, and transportation markets.
The company has 250 employees in the IoT services, a $90-million annualized run rate, and now has the scale and assets it needs to compete globally for IoT connectivity deals.
Takeaway
The discount in SWIR stock is now over. A dip may create a better entry point but if it does not, the stock will likely out-perform the market in the coming years.
