NEW BULLISH Plays
Sierra Wireless Inc. - SWIR - close: 42.18 change: +0.16
Stop Loss: 39.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 20, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 861 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 marketing material, "
Sierra Wireless is the global leader in machine-to-machine (M2M) devices and cloud services, delivering intelligent wireless solutions that simplify the connected world. We offer the industry's most comprehensive portfolio of 2G, 3G and 4G embedded modules and gateways, seamlessly integrated with our secure M2M cloud services. Customers worldwide, including OEMs, enterprises, and mobile network operators, trust our innovative solutions to get their connected products and services to market faster. Sierra Wireless has more than 900 employees globally and has R&D centers in North America, Europe and Asia." They make products for a wide array of industries including: automotive, transportation, industrial and infrastructure, security, field service, healthcare, consumer, energy, sales and payments, and networking.
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. Analysts were expecting a profit of $0.13 per share on revenues of $138.7 million. SWIR delivered $0.24 with revenues up +27.6% from a year ago to $143.3 million. That's a record quarter for revenue and up +6% from the prior quarter. Organic revenue growth was up +18.8%.
Looking at the details of the quarter SWIR said their non-GAAP earnings were up +249% from a year ago.
SWIR raised their guidance again for the fourth quarter of 2014. They now expect EPS in the $0.25-0.28 range with revenues in the $145-148 million area. That's about +23% growth from a year ago. Analysts were only forecasting $0.17 per share on revenues of $142 million.
With this big surge in earnings and revenue growth it's not a surprise to see the stock outperforming. SWIR is up +74.5% in 2014 versus the NASDAQ's +14% gain. The point & figure chart for SWIR is forecasting a target near $53.
With a market cap around $1 billion I wouldn't be surprised if someone acquires SWIR, but that's pure speculation on my part. They have about $200 million in cash and no debt.
This past week saw shares of SWIR rally past resistance near $42.00 and close at multi-year highs. Tonight we are suggesting a trigger to open bullish positions at $42.85.
Trigger @ $42.85
- Suggested Positions -
Buy SWIR stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the MAR $45 CALL (SWIR150320C45) current ask $3.20
Option Format: symbol-year-month-day-call-strike