SWIR Stock Prediction

Summary:

• Sierra Wireless stock has fallen by almost 50% since the beginning of the year due to the weak guidance of the firm and not due to real long-term concerns.
• The firm is well positioned in the promising Internet of Things (IoT) market, which is expected to almost triple over the next five years.
• The acquisition of Accel Networks will improve Sierra’s solutions dedicated to enterprise – a significant part of the IoT opportunities.
• Sierra Wireless Corporation has a solid balance sheet and climbing revenues.
• I Know First’s algorithmic analysis is bullish on SWIR

Sierra Wireless Corporation’s objective is to simplify the connected world by distributing wireless solutions. Despite its global leading position in Machine-To-Machine (M2M) and Cloud devices, the stock has tumbled since the beginning of the year by almost 50%. The stock price fell quickly in May despite the positive quarterly results, as investors have been disappointed about the weaker guidance of the firm. While the guidance was lower, the stock should still rebound during the rest of the year due to its long-term strategy.

Internet Of Things: An Expanding Market

Sierra Wireless is a key actor in the development of the Internet Of Things (IoT), which is an impressive growing market. The company creates products that enable networked machines to exchange information without human’s interaction. This is a huge revolution in our society and we may not be aware of the future buzz surrounding the Internet Of Things.

IoT considerably improves company’s productivity by gathering and leveraging big data; that is why more and more companies will look to further develop their Internet connectivity. For example, one of the Sierra Wireless products called AirVantage simplifies the integration of wireless data in the firm and accelerates the development of web/mobile apps. This perfectly suits the need of the firms.

The Internet Of Things market is expected to grow to $1.7 trillion in 2020 from $656 billion in 2014 – almost triple over the next five years. And we will not be shock if it would be even bigger, as new revolutions like this can be underestimated. Therefore, this future business will offer plenty of room for growth.

Well Positioned In The IoT Growing Market

Sierra Wireless has 17 years of experience. In that time, the firm has been recognized as a valuable enterprise in this growing market. They already have a huge range of clients in different sectors (automobile, consumer, healthcare, energy, etc.). For example, Cisco, Ingenico, Nespresso , AT&T and Chrysler are part of its numerous customers.

As you can see on the chart above, the firm is ranked as the biggest player in the M2M market. This supports the notion that Sierra Wireless will not encounter difficulties to capture the IoT growth opportunities.

Going Further with Accel Networks Acquisition

As the Internet world is changing very fast, Sierra Wireless Company must have the capacity to continuously adapt its business in order to keep its top position. The 4G transition impacts its business and they are actually managing this switch well.

The firm has a strategy of growth by acquisitions. They have completed many such acquisitions and the recent one of Accel Networks on June brings a significant competitive advantage, especially for the 4G transition.

Accel Networks provides 4G LTE connectivity services in the US. They have more than 300 customers over 5,000 locations. Accel Networks has built a strong customer base thanks to its efficient solution, which enables companies to rely on cellular-based connectivity for their most critical applications. The firm is specialized in enterprise connectivity. It is obviously a very good added value for Sierra as the enterprise will be the largest IoT device market.

Still Have A Strong Balance Sheet Despite Different Acquisitions

When companies are making acquisitions, balance sheet could be hit, and this could create stock instability. However, this is not the case for Sierra Wireless Corporation. In fact, Sierra’s balance sheet remained strong in Q1 2015 despite the company spending $90 million to acquire Maingate. They maintained a cash balance of $100 million. The company has a solid cash position with no debt outstanding, which is a positive signal for investors as the company is able to invest and innovate easily.

The first quarter results reported a revenue climb of 24.1% year over year to $150.4 million. So how can we explain the collapse of SWIR stock with all these positive conditions? As we said before, investors were frustrated about the cautious guidance of the firm. The company’s weak guidance is due to radio-frequency shortages. This short-term issue will be solved by the company quickly, meaning the price should recover.

Algorithmic Forecast

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

I Know First published a bullish forecast on Sierra Wireless, a wireless communications equipment designer and manufacturer, on Seeking Alpha. Having explained how I Know First’s algorithm works, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company. The three-month and one-year forecasts for Sierra Wireless are included.

Sierra Wireless is among the top stock picks for both time horizons. The stock has a strong, bullish signal for both, indicating that the stock is currently very undervalued. Over the predicted time horizons, the stock is currently undervalued, which is in support of the fundamental analysis. The long-term opportunities of the firm are significant thanks to the growing Internet Of Things market.

Positive signal strength does not mean investors should automatically buy the stock. Dr. Roitman, who created the algorithm, created rules for entry for a stock such as Blackstone. Using this trading strategy, an investor should buy a stock if the last 5 signal strength’s average is positive and if the last closing price is above the 5-day moving average price. When both of these conditions are met, it is a good time to initiate a position in the stock.

Conclusion

With such a strong balance sheet and some promising opportunities in the Internet Of Things market, SWIR stock is going to recover in the long term. Buying the stock now with a lower price would lead to an even more interesting return in the future.

During the current month, analysts mainly recommended to hold the stock, while a few of them have a ‘strong buy’ signal. We believe that investors should increase their exposure to this stock. I Know First’s algorithm is bullish on this company, believing the second quarter results will surpass the firm’s feeble guidance and the firm will post positive results over the long-term.