The Internet of Things segment — IoT for short — has been getting a lot of attention lately. It certainly helps that there has been much progress in technologies like cloud computing, AI (Artificial Intelligence), sensors and mobile devices.
For the most part, the Internet of Things is about the networking of physical systems — such things vehicles, homes, aircraft and manufacturing plants — to allow for improved performance, monitoring, security and lower costs.
And yes, the market is massive — and is likely to grow at a strong pace. Boston Consulting Group predicts spending on IoT is expected to hit a whopping $267 billion by 2020.
As should be no surprise, Wall Street has been capitalizing on this opportunity, exemplified by a variety of exchange-traded funds, including Global X Internet of Things ETF (NASDAQ:SNSR).
Yet there is a nagging issue — that is, there are not many pure-plays with IoT. The fact is that most publicly traded operators in this industry have diverse business operations; General Electric Company (NYSE:GE) and Cisco Systems, Inc. (NASDAQ:CSCO) come to mind. This tends to dilute the impact of the growth on a portfolio.
So what’s an investor to do? Well, one option is to consider the IPO market, which is focused on emerging tech companies. And the good news is that we’ve seen several companies come public that should benefit nicely from the IoT megatrend.
One that stands out is Talend SA ADR (NASDAQ:TLND). The company, which got its start in 2005, has leveraged core open source software into a platform that processes huge volumes of data in real time. The technology is also very flexible, as it can handle traditional big data environments as well as cloud infrastructures from Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT).
The bottom line: Talend helps companies get a unified view of their business operations and customers across the organization. Just some of the benefits include improved customer support, fraud detection and predictions for equipment maintenance. The company describes itself this way: “We are a key enabler of the data-driven enterprise where data is becoming a strategic asset.”
Oh, and TLND stock is up almost 60% since its IPO in August 2016.
OK, as for the Internet of Things, the company’s technology has also proven adept at making connections with back-end systems and analytics apps. After all, Gartner points out that this is one of the top three technical challenges. This is due to the wide array of protocols and formats that needs to effectively mesh with the huge volumes of data. Actually, Gartner forecasts that roughly half of the costs of an IoT implementation will be on data integration.
A powerful case study of Talend’s technology actually involves GE’s Water & Power Business. Even though the company had been collecting data from the systems — such as for maintenance and replacements — GE knew that more could be done. So by using Talend, the company was able to process a terabyte a data in day from each turbine. As a result, the cost savings have been significant, coming to $2 to $5 million per turbine per year.
Takeaway On TLND Stock
Given the strength of Talend’s technology, the company has been able to build a roster of marquee customers for IoT-related opportunities, including Air France KLM SA (ADR) (OTCMKTS:AFLYY) and M2oCity, an independent telecom operator for smart metering and the smart city operations.
But the technology is also critical to other growth areas like mobile apps, wearables and cloud systems. The result is that growth has been standout. During the latest quarter, revenues jumped by 41% to $35.8 million and the company posted positive operating cash flows of $1.9 million. In light of this, TLND stock has seen nice gains since coming public in the summer of 2016.
And there is certainly much runway ahead. Based on estimates from the S-1, Talend’s addressable market is roughly $17 billion — and the category is generally served by legacy operators that have aging technologies.
Tom Taulli runs the InvestorPlace blog IPO Playbook and is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
