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.
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, efficiency, and much more.
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. Hewlett Packard Enterprise HPE
Hewlett-Packard HPQ spun off Hewlett Packard Enterprise in the fall of 2015. HPE offers its business clients everything from management software to hybrid cloud solutions, and of course, hardware, software, and security solutions focused directly on IoT. Shares of Hewlett Packard Enterprise have surged 20% to start the year to outpace the S&P 500’s 14% climb and its industry’s average. Despite the climb, HPE stock still rests roughly 15% below its 52-week high.
Investors should also note that HPE currently sports a “B” grade for Value in our Styles Scores system. The stock is trading at 9.5X forward 12-month Zacks Consensus EPS estimates at the moment, which marks a discount compared to its industry’s 14.8X average, as well as its two-year high of 13.9X and its median over that stretch of 11.6X. Looking ahead, the company is expected to see its second-quarter fiscal 2019 earnings jump 5.9% to reach $0.35 per share. Meanwhile, the company’s current full-year earnings are projected to pop 4.5%, with 7.7% growth expected in 2020. Plus, HPE’s positive earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy) at the moment.
2. 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 #2 (Buy), along with “A” grades for both Growth and Momentum in our Style Scores system. Shares of CREE have soared over 36% in 2019 and hit a brand new 52-week high Wednesday.
Peeking ahead, analysts expect Cree’s current-quarter earnings to skyrocket 300% and its current fiscal year earnings—which ends in June—to soar 310.5%. That growth is expected to continue to the tune of another 65% in the following year. Cree has also seen a ton of positive earnings estimate revision activity recently, including longer-term positivity within the last seven days.
3. 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 23% this year and rests near its recently-reached 52-week high. Looking ahead, our estimates call for Cisco’s current quarter earnings to surge 16.7% on the back of 3.4% revenue growth. CSCO has also experienced 12 positive earnings estimate revisions for both its current full year and the following year over the last 60 days, against zero downgrades, to help it earn a Zacks Rank #2 (Buy). Plus, Cisco is a dividend payer that is trading in line with its industry’s average forward P/E at 18.5X forward 12-month Zacks Consensus EPS estimates.
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