2 Stocks to Buy to Capitalize on the Internet of Things (IoT) Revolution

NASDAQ: SWKS | Skyworks Solutions Inc. News, Ratings, and Charts

SWKS – Increased demand for sensors and cloud services as businesses adopted hybrid working models has boosted the Internet of Things (IoT) market over the past year. Furthermore, as the race for 5G gains pace, the IoT market should grow significantly in the near term. Consequently, we believe Skyworks Solutions (SWKS) and Garmin (GRMN) could be solid bets to capitalize on this revolution.

Internet of Things (IoT) featured devices have gained prominence during the COVID-19 pandemic because of their immense applications in the technology and software industry. In fact, the demand for IoT solutions and services for easily tracking orders and shipments across different regions was increasing even before the pandemic.

With growing demand for sensors and cloud services in the 5G era, IoT should gain more prominence this year and beyond. The global IoT market hit  $761.40 billion in aggregate value in 2020. Moreover, 35 billion IoT devices are expected to be installed around the world in 2021.

The global IoT market is expected to grow at a CAGR of 10.5% over the next five years to hit $1.39 trillion by 2026. Given this backdrop, we think it’s  wise to invest in Skyworks Solutions, Inc. (SWKS) and Garmin Ltd. (GRMN) for solid returns in the coming months.

Skyworks Solutions, Inc. (SWKS)

Founded in 1962, SWKS designs, develops, manufactures and markets semiconductor products, including intellectual property. The company operates worldwide with engineering, manufacturing, sales and service facilities available throughout Asia, Europe and North America. SWKS’ product portfolio consists of various solutions, including amplifiers, attenuators, detectors, diodes, filters, front-end modules, hybrid, mixers, switches, and modulators.

SWKS collaborated with Xilinx, Inc. (XLNX) to showcase the spectral and power efficiency achievable using its SKY66318-21 power amplifier in 5G infrastructure applications at the CES 2021 Show. In January,  the company announced  that it had shipped more than one million of these power amplifiers. Also in January, SWKS announced that its high-performance Wi-Fi 6E front-end modules were now featured on the world’s first ultra-fast Wi-Fi 6E gaming router from ASUS.

For  its fiscal year 2021 first quarter (ended January 1, 2021) SWKS’ net revenue increased 68.5% year-over-year to $1.51 billion. Its non-GAAP gross profit has increased 71.8% year-over-year to $771 million. The company’s non-GAAP operating income came in at $622 million for the quarter, up 97.2% year-over-year. Its non-GAAP net income of $560.50 million represents a 94.2% rise year-over-year. Also, SWKS’ non-GAAP EPS has increased 100% year-over-year to $3.36.

Analysts expect SWKS’ EPS to improve 75.4% year-over-year for the current quarter, ended March 31, to $2.35. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Moreover, the consensus revenue estimate of $1.15 billion for the current quarter represents a 50.3% rise on a year-over-year basis.

The stock has gained 105.3% over the past year and closed yesterday’s trading session at $183.48.

SWKS’ strong fundamentals are reflected in its POWR Ratings. The stock has a B overall rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has a B grade for Momentum and Quality also. We have also graded SWKS for Growth, Value, Stability, and Sentiment. Click here to access all of SWKS’ ratings.

SWKS is ranked #20 of 99 stocks in the B-rated Semiconductor & Wireless Chip industry.

Garmin Ltd. (GRMN)

Headquartered in Schaffhausen, Switzerland, GRMN and its subsidiaries offer global positioning system (GPS) navigation and wireless devices and applications. The company operates through five segments — Fitness, Automotive/Mobile, Aviation, Marine and Outdoor. Its broad  portfolio of products ranges from cycling accessories to audio control systems, and handhelds and wearable devices. The company sells its products through independent retailers, dealers, distributors, installation and repair shops, original equipment manufacturers, and through its  own website.

On March 31, Garmin International Inc., a GRMN unit, unveiled new features to the Garmin Pilot app for iOS mobile device users, such as generating a graphical weather briefing from Leidos Flight Service, and plus graphical NAVAID NOTAMs to depict when a NAVAID is out of service. GRMN also expanded its strategic relationship with Amazon (AMZN) in March,  integrating Alexa Custom Assistant into GRMN’s in-vehicle OEM infotainment systems.

The company’s net sales increased 22.6% year-over-year to $1.35 billion for the fourth quarter ended December 26. GRMN’s gross profit has increased 23.7% year-over-year to $790.98 million. Its operating income was  $371.27 million, which represents a 34.3% improvement year-over-year, and its non-GAAP net income was $333.45 million, up 35.3% year-over-year. Also, the company’s non-GAAP EPS of $1.73 represents an improvement of 34.1% from the prior year period.

A  consensus EPS estimate of $1.18 for the next quarter, ending June 30,  represents a 29.7%  improvement year-over-year. The company surpassed consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.06 billion for the next quarter represents a 21.6% rise on a year-over-year basis.

The stock has rallied 75.9% over the past year to close yesterday’s trading session at $131.85.

GRMN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary ratings system.

The stock has a B grade for Stability, Sentiment, and Quality also. In addition to the POWR Ratings grades we’ve  just highlighted, one can see GRMN’s ratings for Growth, Value, and Momentum here.

GRMN is ranked #15 of 48 stocks in the B-rated Technology – Hardware industry.

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

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SWKS shares were unchanged in after-hours trading Thursday. Year-to-date, SWKS has gained 23.10%, versus a 7.50% 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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