Buy That Stock – Oh, and Turn Off the Lights

I can sit here speaking these words into my smartphone and emailing them to my editor while getting a text that my laundry is finished, adjusting my home’s temperature, turning on the coffee machine and cleaning my house as I tell my robot vacuum cleaner to start earning his keep.

All of this is possible because everything is connected to the internet – hence the aptly named NexGen mega-trend: the Internet of Things (IoT).

Controlling everything from children’s toys to major systems in our home to cars that drive themselves is just scratching the surface. Industries are also incorporating this technology, as are utilities – you’ve heard of smart meters, right? – and entire cities. Last summer, Las Vegas announced a partnership with Cisco Systems (CSCO) to connect cameras, sensors and other things to help monitor and control traffic, crowds, parking, security, the environment and more. Other huge companies are also making pushes into smart cities, including Microsoft (MSFT), International Business Machines (IBM), AT&T (T) and more.

As with most of the mega-trends we’re following, we are still in the early stages of this one as well. That means huge growth and exciting opportunities to make money. Start with this idea: the number of connected things in the world has already surpassed the number of people. Technology analyst firm Gartner projects the number of connected devices will jump from around 8.5 billion last year to about 20.5 billion by 2020. Spending on IoT is expected to hit $2 trillion.

An IoT Stock on the Move

With billions of connected devices around the world and growing, we have multiple ways to profit from this trend that is transforming both companies and our lives. One lesser-known company that I really like is Adesto Technologies (IOTS), which jumped 10% on Tuesday when an analyst at B. Riley FBR started coverage on it. This $136 million company’s non-volatile memory products are integral for the connection of devices, which is key as more and more devices become linkable and start speaking to one another.

The company’s latest quarterly report was strong, with earnings of $0.03 a share besting estimates by a penny and revenue growing 31% to $16.15 million, also beating the consensus. The bottom line is on a very high-growth trajectory, as IOTS is expected to earn $0.18 a share this year followed by $0.40 a share in 2019.

IOTS went public in October 2015, and after a quick rally higher it had a really rough 2016, eventually bottoming out around $1.50. Last year was much different, though, as the stock gained 220% from start to finish and at one point traded above $9.

This year has been a bit of roller coaster, but long-term support in the $6 area (the black line) has held, and the recent action has been driven more by broad market volatility and some normal profit-taking after a big rally. I see IOTS at least retesting its all-time high of $9.20, and if it can break through as I expect, double-digit prices could be attained for the first time ever. The B. Riley FBR analyst put his target right at $10, and I think that’s conservative.

My outlook on both IOTS and the larger IoT mega-trend is bullish. The recent weakness was a great buying opportunity – Adesto has already bounced 22% off its recent low – to get into a fast-growing company that is seeing both its top and bottom lines expand at well above the market average.

There are plenty of other potential IoT plays to watch, from an exchange-traded fund like Global X Internet of Things ETF (SNSR) to other innovative companies leading the way – think of the world’s leaders in sensors and controls. There’s incredible growth potential here and a lot of money to be made in the years to come.


Article printed from InvestorPlace Media, https://investorplace.com/moneywire/2018/03/buy-that-stock-oh-and-turn-off-the-lights/.

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