Many businesses are planning to continue, at least in-part, with remote working arrangements even after the pandemic is over given its benefits and the huge investments they made in remote connectivity during the pandemic. This is expected to buoy demand for gadgets that support Internet of Things (IoT) technology. Furthermore, the commercial deployment of 5G technology is expected to create a high demand for secure IoT devices and tech solutions in the coming months. Manufacturing and industrial sectors are also increasingly using IoT technology.
The global IoT market is expected to grow at a 10.5% CAGR over the next five years to reach $1.39 trillion by 2026. Investor optimism about this industry is evident in the Global X Internet of Things Thematic ETF’s (SNSR) 51.2% returns over the past year. This compares to the SPDR S&P 500 Trust ETF’s (SPY) 40.1% gains over this period.
Given this backdrop, we think it’s wise to invest in ABB Ltd (ABB), Skyworks Solutions, Inc. (SWKS) and Qorvo, Inc. (QRVO) because these companies are positioned nicely to benefit from the growing demand for IoT technology.
ABB Ltd (ABB)
ABB is a Swiss-based technology company that manufactures and sells electrification, industrial automation, and robotics and motion products to customers in utilities, industry and transport, and infrastructure sectors worldwide.
On May 17, 2021, ABB’s Robotics and Discrete Automation and Absolicon Solar Collector developed a factory in Sweden to automate mass production of concentrated solar collectors. ABB robots enable Absolicon to produce one solar collector panel every six minutes compared to building three per day, making Absolicon’s solar technology a cost competitive alternative to conventional heating. This acceleration in productivity is likely to sustain a long-term partnership with ABB.
ABB won orders from Stadler Rail, a Swiss-based rail vehicle manufacturer, on April 16, to enable energy efficient and sustainable transportation for operators Schleswig-Holstein and Berlin in Germany. ABB’s energy efficient traction converters and high-power lithium-ion-battery-based on-board energy storage systems will be installed on its power trains. ABB is looking forward to having a long-term partnership with Stadler Rail.
The company received orders worth $7.76 billion in its fiscal 2021 first quarter ended March 31, 2021, which increased 5.6% year-over-year. ABB’s total revenue increased 11% year-over-year to $6.90 billion. Its gross profit has been $2.27 billion, up 18.7% from the prior-year period. Its income from operations is reported to be $797 million for the quarter, which represents a 113.7% improvement year-over-year. While its net income increased 33.5% year-over-year to $502 million, its EPS increased 38.9% year-over-year to $0.25.
A $0.33 consensus EPS estimate for the current quarter, ending June 30, 2021, represents a 50% year-over-year improvement. The stock surpassed the consensus EPS estimates in each of the trailing four quarters. The $7.02 billion consensus revenue estimate for the current quarter represents a 14% rise from the prior-year period. Analysts expect ABB’s EPS to grow 14.6% per annum over the next five years. ABB climbed 79.4% over the past year to close yesterday’s trading session at $33.77.
It’s no surprise that ABB has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Momentum, and a B grade for Growth, Quality and Stability. To see additional POWR Ratings for ABB’s Sentiment and Value, click here.
ABB is ranked #11 of 86 stocks in the A-rated Industrial – Machinery industry.
Skyworks Solutions, Inc. (SWKS)
SWKS designs, develops, manufactures and markets semiconductor products worldwide. The company provides products for use in the aerospace, automotive, broadband, cellular infrastructure, connected home, entertainment and gaming, industrial, medical, military, and wearable markets.
On April 22, 2021, SWKS entered a definitive agreement with Silicon Laboratories Inc. (SLAB), a leading provider of silicon, software and solutions, to acquire SLAB’s Infrastructure & Automotive business in an all-cash asset transaction valued at $2.75 billion. The acquisition encompasses the technology portfolios and related assets of SLAB’s power/isolation, timing and broadcast product lines, which should accelerate SWKS’ capabilities in the automotive, communications and industrial markets.
SWK announced on January 12 that its high-performance Wi-Fi 6E front-end modules were featured on ASUS’ ultra-fast Wi-Fi 6E gaming router. Utilizing 6-7 GHz extended band, Wi-Fi 6E standard enables faster, high-quality connectivity and supports the connectivity of many users during video conferencing, online gaming, streaming TV, AR/VR, home security cameras and online exercise apps. SWKS expects to see high demand for this product because most businesses are continuing to work remotely.
For its fiscal year 2021 second quarter, ended April 2, 2021, SWKS’ net revenue came in at $1.17 billion, which represented a 53% year-over-year improvement. The company’s gross profit increased 54.8% year-over-year to $594.8 million. Its non-GAAP operating income is reported at $440.10 million for the quarter, up 77% from the prior-year period. SWKS’s non-GAAP net income came in at $395.20 million, which is a 72.2% year-over-year rise. Its non-GAAP EPS increased 76.9% year-over-year to $2.37.
Analysts expect SWKS’ EPS to improve 70.8% year-over-year for the current quarter, ending June 30, 2021 to $2.14. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And its $1.10 billion consensus revenue estimate for the current quarter represents a 49.1% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 16.9% per annum over the next five years. SWKS has gained 43.4% over the past year and closed yesterday’s trading session at $168.85.
SWKS’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Quality also. In addition to the POWR Ratings grades we’ve just highlighted, one can see SWKS’ ratings for Growth, Stability, Value, Sentiment and Momentum here.
SWKS is ranked #22 of 98 stocks in the B-rated Semiconductor & Wireless Chip industry.
Qorvo, Inc. (QRVO)
QRVO develops and commercializes technologies and products and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications worldwide. The company designs, develops, manufactures and markets its products to U.S. and international original equipment manufacturers (OEMs) and original design manufacturers (ODMs).
On May 26, QRVO introduced two new 5 GHz front-end modules (FEMs) that integrate a high-frequency bulk acoustic wave (BAW) filter, featuring QRVO’s unique bandBoost filter technology. Its reduced board size maximizes capacity and range and enables consumers to fully enjoy the speed advantages of mesh home networks. QRVO hopes to witness good sales of this product because the demand for home mesh systems is rising.
QRVO launched its first Constant-On-Time (COT) ACT88760 power management ICs on May 17. It features 13 voltage rails and 25 amps of power across all outputs. The product’s flexibility, small form factor and low quiescent current (LQC) addressing power, performance and size challenges in applications should witness good sales in key growth markets.
For its fiscal year 2021 fourth quarter, ended April 3, 2021, QRVO’s non-GAAP revenue came in at $1.07 billion, which represented an improvement of 36.2% year-over-year. The company’s non-GAAP gross profit increased 44.5% year-over-year to $564.70 million. Its non-GAAP operating income is reported at $357.20 million, up 70.2% from the prior-year period. QRVO’s non-GAAP net income came in at $315.40 million, which represents a 70.2% increase from the prior-year period. Its non-GAAP EPS increased 74.5% year-over-year to $2.74.
Analysts expect QRVO’s EPS for its fiscal year 2022 first quarter, ending June 30, 2021, to be $2.46, up 64.2% year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. For the current quarter, analysts expect QRVO’s revenue to be $1.08 billion, representing a 37.5% rise from the prior-year period. Analysts expect EPS to grow at 16.2% per annum over the next five years.
QRVO has gained 73.9% over the past year and 36.5% over the past nine months. It closed yesterday’s trading session at $179.47.
QRVO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Quality, and a B grade for Growth and Sentiment. We have also graded QRVO for Value, Stability and Momentum. Click here to access all QRVO’s ratings.
QRVO is ranked #15 of 98 stocks in the Semiconductor & Wireless Chip industry.
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ABB shares were trading at $34.16 per share on Thursday afternoon, up $0.39 (+1.15%). Year-to-date, ABB has gained 24.20%, versus a 12.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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