Rapid digital transformation in the past few years has spurred the growth of the Internet of Things (IoT). One of the hottest and fastest-growing segments in the tech space today, IoT encompasses a wide array  of devices, data sharing and  connectivity. Most everyday electrical  devices, i.e., lights, clocks, cameras, computers, doorbells, etc.,  that  connect through the internet fall within the scope of IoT.

The expansion of IoT has been one of the biggest driving forces of the 5G wireless technology. This sector is poised  for massive expansion and companies in this space are gearing up to capitalize on this potential market growth.

Click here to checkout our 5G Industry Report for 2021

According to Mordor Intelligence, the global IoT market is expected to grow at a CAGR of 10.53% to $1.4 billion by 2026. Advanced data analytics, affordable connected devices, and increased adoption of cloud computing are the major factors at play in driving  this growth.

Picking IoT stocks demands a lot more research, however, because the industry is still fragmented and comprises a mix of players, some of which are pure-play stocks while others are big tech companies with limited exposure to IoT.

We believe Analog Devices, Inc. (ADI), Broadcom Inc. (AVGO), PTC Inc. (PTC), and Alarm.com Holdings, Inc. (ALRM) are four IoT stocks that are well-positioned to gain significantly in the coming months.

Analog Devices, Inc. (ADI)

ADI is involved in the designing, manufacturing, testing, and selling of integrated circuits (ICs), software and  subsystems that employ analog, mixed-signal and  digital signal processing technologies. ADI has a major presence in the IoT chemical sensor market.

ADI’s revenue during the quarter ended January 31, 2021 climbed 20% year-over-year to $1.6 billion, led by record revenue in its industrial segment. Its EPS for the quarter climbed to $1.04 from $0.55 posted in the same period last year.  President and CEO of ADI, Vincent Roche, stated, “We are confident that a broad-based recovery is underway given continued momentum in ADI’s bookings and lean inventories across the industry.”

Analysts expect ADI’s revenue for the year ending April 30, 2021 to be $1.6 billion, representing a 20.8% year-over-year decline. Its EPS for the quarter is expected to climb 34.3% to $1.45.

ADI surged 66.1% over the past year to close Friday’s trading session at $149.54. Over the past six months, the stock climbed 31.4%.

It’s no surprise that ADI has an overall rating of B, 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.

ADI also has a Momentum and Quality ratings of B. Of the 99 stocks in the B-rated Semiconductor & Wireless Chip industry, it is ranked #33.

In addition to the POWR Rating grades I’ve just highlighted, you can see the ADI ratings for Stability, Growth, Value, and Sentiment here.

Broadcom Inc. (AVGO)

AVGO has dabbled in the IoT space since its early days. The company’s wireless chips were associated with Zigbee standards, which featured in many  home devices. Over the years, AVGO has transitioned from wireless IoT to security in the form of Commercial IoT subsequent to  its merger with Symantec Enterprise Security in 2019. AVGO now offers critical system protection from cybersecurity threats to IoT.

During the first quarter, ended January 31, 2021, AVGO’s revenue climbed 14% year-over-year to $6.6 billion. Its EPS for the quarter rose to $3.05 from $0.74 posted in the same period last year.

Analysts expect AVGO’s revenue for the quarter ending April 30, 2021 to be $6.5 billion, representing a 14.2% year-over-year rise. Its EPS is expected to grow at the rate of 8.6% per annum over the next five years.

AVGO ended Friday’s trading session at $451.17, rallying 106.2% over the past year. During the past six months, AVGO surged 25.4%.

Due to its bright prospects, AVGO has an overall rating of A, which translates to a Strong Buy in our POWR Rating system. AVGO has a Growth, Stability, and Momentum       ratings of B. In the Semiconductor & Wireless Chip industry, it is ranked #2.

Click here to see the additional POWR Ratings for AVGO (Value, Quality, and Sentiment)

Note that AVGO is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

PTC Inc. (PTC)

PTC is a software-as-a-service company that operates primarily  in the Americas, Europe, and the Asia Pacific. ThingWorx, the company’s IoT platform, enables customers to manage their operation’s digital transformation, products, and services. PTC’s  ThingWorx Solution Central, a centralized portal in the cloud, enables users to discover, deploy, and manage ThingWorx applications.

During the first quarter, ended December 31, 2021, PTC’s revenue climbed 20% year-over-year to $429 million. Its EPS for the quarter declined to $0.20 from $0.31 posted in the same period last year. Its acquisition of Arena Solutions together with Onshape, has paved the way for the leading pure-SaaS CAD and PLM solution set in the market. Its ARR grew 16% over the year to $1.34 billion, indicating a strong performance in its core and growth businesses as well as its global channel.

A consensus revenue estimate for the quarter ending March 31, 2021 is $416.2 million, signaling a 15.7% year-over-year increase. Its EPS for the quarter is expected to grow 18.6% to $0,70.

PTC ended Friday’s trading session at $132.19, gaining 144% over the past year. During the past six months, PTC climbed 60.6%.

PTC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. PTC has a Growth Grade of A and a Sentiment and Quality grade of B. In the D-rated Software – Application industry, it is ranked #8 out of 112 stocks.

To see additional POWR Ratings for Momentum, Value, and Stability for PTC, Click here.

Alarm.com Holdings, Inc. (ALRM)

ALRM offers cloud-based solutions for smart residential and commercial properties in the United States and worldwide.  The company delivers interactive security solutions to control and  monitor  security systems, as well as connected security devices that include door locks, motion sensors, garage doors, thermostats and  video cameras.  Alarm.com and Other are the two segments through which it operates.

During the fourth quarter, ended December 31, 2020, ALRM’s revenue climbed 18% year-over-year to $165.6 million, driven by 17% growth in SaaS and license revenue. The company stated that during the quarter the company delivered a breadth of innovative new platform capabilities for its residential and commercial services. Its EPS for the quarter rose to $0.31 from $0.26 posted in the prior-year period.

Wall Street expects ALRM’s revenue for the quarter ending March 31, 2021 to be $153.9 million, representing a 1.3% year-over-year increase. Its EPS is expected to grow at the rate of 20% per annum over the next five years.

ALRM ended Friday’s trading session at $87.24, climbing 143.6% over the year. During the past six months, ALRM soared 56%.

It’s no surprise that ALRM has an overall rating of B which equates to Buy in our POWR Rating system. In the A-rated Home Improvement & Goods industry, it is ranked #33 of 63 stocks.

To see additional POWR Ratings for ALRM, Click here.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

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ADI shares were trading at $149.14 per share on Monday afternoon, down $0.40 (-0.27%). Year-to-date, ADI has gained 1.39%, versus a 5.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...

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