Investors looking at exposure to the Canadian tech sector have likely come across both Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR) and BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY), but which of the two companies makes the best investment?
The notoriously volatile Sierra Wireless is a specialist in the Internet of Things (IoT), that is, software and hardware that allows tech devices to communicate with each other. Many are expecting the IoT to be the next tech boom; therefore, exposure to this sector could be Sierra Wireless’s strength. Sierra Wireless holds the top global market share of IoT, and if this sector booms, this company should soar, but this stock is not for the faint of heart.
Sierra Wireless’s stock has been through some dramatic swings, and right now it is riding a high. In order to bet on Sierra Wireless’s stock, you need to bet that the company will see increased business and better finances as demand for the IoT technology improves.
Sierra Wireless posted a loss in 2014. Many think that the stock value is based on investors’ faith in the growth potential of the company and that they are overlooking the financial flaws. If that is the case, the company needs the IoT demand to boom, and even if it does, that is not a guarantee of financial growth.
For those interested in the IoT, BlackBerry may be a better bet. The company recently introduced a comprehensive IoT platform. BlackBerry is already an IoT leader in the auto industry, the sector that many believe could be the most lucrative.
BlackBerry has its own negatives as well. I mean, not too long ago it seemed that the company would go bankrupt any day. Still, under new leadership, the company has so far had a successful turnaround, although they are not out of the woods yet.
Which should you buy?
Sierra Wireless’s strength is clearly its large share of the IoT market. However, BlackBerry’s interest in increasing its share, combined with the fact that it already operates in the most profitable sector of the IoT market, is a point in favour of BlackBerry.
BlackBerry’s diversity means the company could make a more steady investment. Sure, the IoT demand could boom, but what if it’s a bust? In that case, BlackBerry could still profit from its other products and offerings, while Sierra Wireless would face some very tough times.
The one negative that BlackBerry has is its recent financial struggles, but in this case, I don’t think looking in the rearview mirror provides an accurate vision of what lies ahead.
Under new leadership, BlackBerry is becoming quite the turnaround story, and with a diverse set of products, I think the company is a safer investment compared to Sierra Wireless. That being said, if you are a firm believer in the future of the IoT and you don’t mind the risk, Sierra Wireless could be the more profitable choice. Unless, of course, BlackBerry takes away a chunk of its market share.