1 IoT Solutions Provider Could Outperform BlackBerry (TSX:BB)

Technology stocks underperform in 2022, although one IoT solutions provider is a screaming buy compared to a former smartphone maker.

| More on:
edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

Image source: Getty Images

Technology stocks aren’t doing very well in 2022, including the rejuvenated BlackBerry (TSX:BB)(NYSE:BB). Nevertheless, the smartphone maker turned intelligent security software and services provider has turned the corner and forecasts revenues to double over the next five years.

The news might not be inviting to some investors who have been waiting too long for a takeoff. As of this writing, the tech stock trades at a deep discount ($7.69 per share) and continues to underperform (-34.94%). Meanwhile, Sierra Wireless (TSX:SW)(NASDAQ:SWIR) could steal the thunder from BlackBerry in the connected economy.

Sierra is doing far better this year with its 23.41% year to date. Also, its strong sequential and year-over-year growth in Q1 2022 should impact people looking for visible growth in fewer than five years. In 3.01 years, Sierra’s total return is 54.61% (15.59% CAGR) compared to BlackBerry’s -32.37% (-12.19% CAGR).

Ambitious revenue projections

BlackBerry banks on its two core business segments to drive long-term growth, although management expects IoT to outpace cybersecurity. It also forecasts BlackBerry’s revenues to reach US$886 million in fiscal 2025 before rising to US$1.2 billion in fiscal 2027. The company’s revenue projections translate to a 13% CAGR.

While cybersecurity’s revenue is likely to increase 61% to US$770 from fiscal 2022 to fiscal 2025, CAGR is less than the 20% projection for IoT. Moreover, the $4.43 billion company targets a 100-basis-point average increase in adjusted (non-GAAP) gross margin annually by fiscal 2027.

Besides investing 30% of revenue in R&D in 2023, BlackBerry expects to generate positive adjusted earnings per share and cash flow starting in 2025. On May 18, 2022, management announced a multi-year agreement with a Canadian firm. BlackBerry and Magna International will collaborate to provide integrated Advanced Driver Assistance Systems (ADAS) solutions.

Both companies expect the partnership to provide them with a competitive advantage. Likewise, the global ADAS market should see significant growth in the next 10 years, as more OEMs launch vehicles with ever-expanded feature sets. Investors hope BlackBerry will not disappoint like before and deliver on its promises.

Head start

While BlackBerry is projecting revenue growth down the road, Sierra Wireless’s revenue growth in IoT solutions in Q1 2022 versus Q1 2021 was 79%. Also, the net loss of US$12.67 million for the quarter was 58% lower compared to a year ago. The IoT solutions of this $1.05 billion company combine devices, network services, and software to unlock value in the connected economy.

Apart from IoT, Sierra provides Enterprise solutions that continue to experience strong demand for routers in key industrial and public safety verticals. The company caters to clients across various industries, including industrial manufacturing, energy & natural resources, and transport & logistics, among others.

Sierra expects revenue between US$160 million and US$175 million in Q2 2022, or 20% higher than in Q2 2021. Management is confident that the strong demand and its investments in inventory can combat the industry-wide tightness in supply.

Better deal

The markets where BlackBerry and Sierra Wireless operate are volatile but fast growing. However, Sierra has the edge, because BlackBerry is still in transition mode. Furthermore, if stock performance is the gauge, you already know which one is the better deal.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Magna Int’l.

More on Tech Stocks

analyze data
Tech Stocks

Nuvei Stock Is on Fire This Year: Is it a Good Buy Today?

For investors looking for a prominent Canadian growth story, Nuvei stock has become a clear winner, but can the rally…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

Growth Stocks: A Once-in-a-Lifetime Opportunity to Get Rich

Here's why investing in quality growth stocks such as Docebo and Datadog may allow you to generate sizeable returns.

Read more »

analyze data
Tech Stocks

Buy the Dip: 3 TSX Stocks and ETFs Worth Your Attention

As the year nears the end, it is time to buy some stocks and ETFs at the dip and book…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Tech Stocks

Is Shopify Stock Worth a Buy in December?

Shopify stock has almost doubled in 2023. While results continue to impress, it's trading at lofty valuations fueled by sky-high…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

3 Top E-Commerce Stocks to Buy on the TSX Today

These e-commerce stocks have already shown some signs of improvement, but 2024 could be huge for today's investor.

Read more »

exchange traded funds
Tech Stocks

The ABCs of Diversifying Away From SPY Stock for Canadians Investing in the U.S.

If SPY stock is your only country-level diversification, you are missing out on some opportunities. Here are the ABCs of…

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

2 Top Fintech Stocks to Buy on the TSX Today

Consider buying these two top fintech stocks if you want to inject solid long-term growth potential into your self-directed investment…

Read more »

Businessman holding AI cloud
Tech Stocks

Revolutionizing Industries: Why Every Canadian Should Consider AI Stocks

Canadian tech stocks like Shopify Inc (TSX:SHOP) use AI to improve customer experiences.

Read more »