The “Internet of Things” essentially connects household products, industrial devices, vehicles, and much more to allow for advanced monitoring. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.
For example, consumer-level IoT products include things like Amazon’s AMZN Echo “smart speaker,” wearable motion and activity tracking products from the likes of Fitbit FIT and Apple AAPL, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.
One of the more obvious plays here for investors is semiconductor stocks, as chipmakers should be able to benefit from the growth of connected devices. But some chip stocks, including powers like Nvidia NVDA, have been sluggish recently. With that said, IoT is set to become nearly ubiquitous, which means investors can try to profit from its growth in countless industries and firms.
So today we’ve found three stocks which have been flagged by the Zacks Rank that could be poised for further IoT growth soon.
1. Cisco Systems, Inc. CSCO
This historic networking and tech giant expanded its IoT business in recent years, offering clients the chance to connect everything from transportation fleets to assembly lines in order to run their operations more efficiently. Cisco sells IoT-related hardware and software, among other connectivity solutions, and saw its revenues climb 7% in its recently-reported quarter to top Wall Street estimates. CSCO also beat earnings estimates despite having to raise some of its prices for switches and routers in order to combat trade war-focused tariffs on Chinese produced goods.
Cisco stock has surged 16% this year and hit a new 52-week high Friday on the back of its continued post-earnings momentum. Looking ahead, our Zacks Consensus calls for Cisco’s current quarter earnings to surge 17% on the back of 3.4% revenue growth. CSCO has also experienced a ton of positive earnings estimate revision activity to help it earn its Zacks Rank #2 (Buy). Plus, Cisco is a dividend payer that is trading in line with its industry’s average P/E at 17.4X forward 12-month Zacks Consensus EPS estimates, which also marks a discount compared to its year-long high of 18.5X.
2. Dell Technologies Inc. DELL
Dell Technologies returned to the public markets at the end of December, roughly five years after the company’s founder took the company private. Shares of the PC and data-storage giant have climbed nearly 15% in 2019 and the company is set to release its fourth-quarter and fiscal 2019 financial results on Thursday, February 28. Dell bolstered its IoT business in the run-up to its return to the stock market and now offers smart video monitoring solutions, IoT connected bundles, data center-level compute, storage, and networking that bolsters bandwidth, and more.
Dell is projected to see its fourth-quarter revenues jump 7% to reach $23.46 billion, while its adjusted full-year earnings are expected to climb 7.3%. The company is also trading at 7.9X forward 12-month Zacks Consensus EPS estimates. This marks a huge discount compared to the IT Services Market’s 17.6X average and the S&P 500’s 16.9X. Dell sports “A” grades for both Value and Growth in our Style Scores system and is a Zacks Rank #2 (Buy) at the moment.
3. Cree, Inc. CREE
Cree is a manufacturer of LEDs and semiconductors that enhance the value of solid-state lighting, power and communications products. The company’s “SmartCast” platform enables Power over Ethernet technology and is geared toward IoT products and Smart Building platforms. CREE sports a Zacks Rank #1 (Strong Buy) and has experienced gains of 24% in the past three months to crush its broader industry’s 14% average climb.
Peeking ahead, analysts expect Cree’s current-quarter earnings to skyrocket 300% and its current fiscal year earnings—which ends in June—to soar over 310%. That growth is expected to continue to the tune of another 63% in the following year. Current estimates also see Cree’s revenue growth in these years reaching 10% and 11%, respectively, which means the company might not see the pullback some on Wall Street expect other semiconductors to witness in the near future.