What Bear Market? Sierra Wireless Stock Is up 83% in 2022

Sierra Wireless stock has doubled shareholder returns in the last year, easily outpacing the broader markets by a significant margin.

| More on:
Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept

Image source: Getty Images

Shares of Canada-based IoT (Internet of Things) solutions provider Sierra Wireless (TSX:SW)(NASDAQ:SWIR) have surged over 100% in the last 12 months and are up 83% year to date, easily outpacing the broader markets. In 2022, shares of several tech stocks, including Canada’s very own Shopify, are down 75% from all-time highs.

Now valued at a market cap of $1.6 billion, can Sierra Wireless continue to derive outsized gains for investors?

Why Sierra Wireless stock is up in 2022

Sierra Wireless aims to combine edge devices, connectivity services, and its cloud platform to provide a wide suite of enterprise-facing integrated IoT solutions. These edge-to-cloud solutions consist of embedded and networking devices that are unified with network connectivity services.

Sierra’s portfolio of solutions allows businesses to improve operational efficiencies, thereby creating enhanced customer experiences as well as additional revenue streams.

Due to the solid demand for its products, Sierra’s revenue in the second quarter (Q2) surged 41.5% year over year to US$188 million. What’s more, the tech stock swung to an adjusted net income of US$16.7 million, or US$0.43 per share, in the June quarter compared to a loss of US$1.1 million, or US$0.03 per share, in the year-ago period.

Sierra Wireless easily surpassed Bay Street consensus estimates in the quarter due to robust customer demand for its 5G modules and a widening product lineup. Its revenue and earnings gained pace in the first two quarters of 2022, despite chip shortages that are plaguing the global semiconductor industry.

Sierra also ramped up its production capacity in Q4 of 2021, allowing the company to manufacture additional routers and gateways. It emphasized the procurement team could secure enough raw materials to fulfill customer demand.

Sierra Wireless also claimed the order inflow for its products is resilient, with a strong order backlog for 2023. In fact, during the Q1 earnings call, company chief executive officer Phil Brace claimed the order backlog was far in excess of what Sierra Wireless can fulfill, indicating revenue growth should remain strong.

What’s next for Sierra Wireless stock and investors?

The global demand for IoT connectivity solutions is forecast to increase by 21% annually through 2026, which should drive top-line growth for Sierra Wireless higher. Analysts expect Sierra Wireless to increase revenue from US$602 million in 2021 to US$1 billion in 2023. Comparatively, its bottom line is forecast to improve from a loss of US$1.04 per share to adjusted earnings of US$1.81 per share in this period.

So, the stock is valued at 1.2 times 2023 sales and a price-to-forward-earnings multiple of 20, which is quite reasonable.

We can see that Sierra Wireless is part of a rapidly expanding addressable market. Despite its outsized gains in 2022, the stock is also trading at an attractive valuation.

Last month, a Bloomberg report stated that Semtech is in advanced talks to acquire Sierra Wireless. Semtech is a U.S-based chip manufacturer that operates in the IoT hardware business. Semtech ended the June quarter with long-term debt and close to US$500 million in cash and short-term investments.

Sierra Wireless soon confirmed it entered a definitive acquisition agreement with Semtech. Under this agreement, Sierra Wireless shareholders will receive US$31 in cash per share. Right now, the stock is priced at US$30.74.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

More on Tech Stocks

question marks written reminders tickets
Tech Stocks

Nvidia’s Historic Stock Split: Will Investors See Bigger Gains?

Nvidia's (NASDAQ:NVDA) record 10:1 stock split entices many investors in several important ways. But some myths aren't technically correct.

Read more »

A worker drinks out of a mug in an office.
Tech Stocks

Want $1 Million in Retirement? 3 Stocks to Buy Now and Hold for Decades

Growth stocks such as Docebo and Celsius Holdings should help you generate outsized gains in the upcoming decade.

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Missed Out on NVIDIA? My Best Growth Stock Pick to Buy and Hold

A TSX growth stock is a top pick and profitable investment choice if you missed out on the ascent of…

Read more »

grow dividends
Tech Stocks

3 Tech Stocks That Could Make You a Millionaire

Given their long-term growth potential, these three tech stocks could deliver oversized returns in the long run.

Read more »

Businessman holding AI cloud
Tech Stocks

Ready to Invest in Artificial Intelligence (AI)? 2 Stocks That Are Solid Bets

These two AI stocks provide investors with strong future opportunities as AI continues to become a part of our everyday…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Is Lightspeed Stock a Buy, Sell, or Hold?

Down 88% from all-time highs, is Lightspeed stock a good buy in May 2024 and can the TSX tech stock…

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

Forget NVIDIA: 1 Tech Stock to Buy Instead

Here’s why Shopify (TSX:SHOP) stock could be a smart long-term buy for investors willing to look beyond NVIDIA’s impressive growth.

Read more »

Lights glow in a cityscape at night.
Tech Stocks

2 Artificial Intelligence Stocks to Buy and Hold for the Next Decade

Qualcomm (NASDAQ:QCOM) and another well-placed AI stock could drive substantial capital gains over the next decade. Here's how.

Read more »