NEW BULLISH Plays
Sierra Wireless - SWIR - close: 37.93 change: +1.45
Stop Loss: 36.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 14, 2015
Time Frame: Exit PRIOR to earnings on May 7th
Average Daily Volume = 712 thousand
New Positions: Yes, see below
Why We Like It:
The Internet of Things (IoT) is going to be huge. Depending on who is making the forecast the size of just how huge it can become is staggering. Last year (2013) there were an estimated 300 million embedded connected devices in the IoT. IDC is estimating that could reach 15 billion connected devices by 2015. Cisco Systems (CSCO) is forecasting 25 billion devices connected to the Internet of Things by 2015 and 50 billion by 2020.
Intel is forecasting up to 200 billion connected devices by 2020.
The backbone of the IoT is M2M communication. That's machine-to-machine communication. SWIR is the market leader with 34% of the market for cellular M2M embedded module market.
According to the company, "Sierra Wireless is building the Internet of Things with intelligent wireless solutions that empower organizations to innovate in the connected world. Over the past 20 years, Sierra Wireless has built a proven track record of developing innovative products and solutions for its customers. We offer the most comprehensive portfolio of wireless machine-to-machine (M2M) devices including 2G, 3G, and 4G embedded modules and gateways that are seamlessly integrated with our secure cloud and connectivity services. OEMs and enterprises worldwide trust our innovative solutions to get their connected products and services to market faster. Our devices are operating on more than 80 networks globally and we have shipped more than 100 million M2M devices worldwide."
Earnings have been improving. Back in July they reported their Q2 results that beat Wall Street's estimates on both the top and bottom line and management guided higher. SWIR announced their Q3 results on November 5th. Even after guiding higher the prior quarter they still beat estimates.
SWIR raised their guidance again for the fourth quarter of 2014.
The string of earnings beats continued when SWIR reported its Q4 earnings on February 5th. The company delivered better than expected results on both the top and bottom line. Revenues were up +25.7%. Unfortunately management lowered their Q1 guidance below analysts' estimates. The stock dropped quickly on this new forecast.
The weeks since its February earnings report have been a bit rocky for SWIR. On the plus side the stock appears to have found a new bottom with support in the $32.00 area. After some profit taking yesterday traders bought the dip at technical support near its 10-dma and 50-dma this morning. If this bounce continues SWIR could see some short covering. The most recent data listed short interest a 14% of the relatively small 30.9 million share float.
We are suggesting a trigger to launch bullish positions at $38.55.
We'll try and limit our risk with an initial stop loss at $36.45. Please note that this will be a short-term trade. SWIR has earnings coming up on May 7th. We'll plan on exiting prior to their announcement.
Trigger @ $38.55
- Suggested Positions -
Buy SWIR stock @ $38.55
- (or for more adventurous traders, try this option) -
Buy the MAY $40 CALL (SWIR150515C40) current ask $1.45
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike