Opinions
Robert McWhirter
Sierra Wireless
SW-T
WATCH
Aug 07, 2015
Stock price when the opinion was issued
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This is in the “Internet of things” space, and make modules that allow cars, refrigerators, etc. to connect to the Internet. This is in the growth space which is becoming crowded. A well-run business, and has had quite a run. Could be a potential takeover candidate at some point.
He likes the space “the Internet of things” that this is in. This has about 38% of the business in Canada and he thinks it is going to keep growing. It is in the right sector, between the pro-growth and the defensive. They just had a fantastic quarter and caught the street off guard. Sees this having a double from here. The next resistance is around $46, and he thinks it is taking out the $58 at some point. (Analysts’ price target is $29.50.)
This company reinvented itself a number of times over the years. They are a technology hardware manufacturer. This is best summed up by calling them an “Internet of things”, for all kinds of devices. From a long-term perspective, it is subject to the vagaries of the product cycle and technological obsolescence. He doesn’t care for the volatility and prefers others.
The company is happy with their current results, but the challenge is going to be the upcoming quarter. Some of the sales they were expecting in Q3 have been pulled forward into Q2, which bulks up the near term results, but means that Q3 might be more of a challenge. ROE of 10%. The PE is 22X against earnings growth forecast of 79%, as earnings are expected to go from $.83 to $1.48 in 2016. For 2017, earnings are expected to grow at 39% against a 15 PE. This gives a PE to growth rate of .5, and typically a growth rate of less than 1 is viewed as favourable. Thinks there is still pretty good long-term opportunity for them. It ranks 131, roughly the top 10% of his database. He would look at technical analysis to see when it is time to jump in.