There are plenty of companies that are already benefiting from the Internet of Things (IoT) trend, and this year is shaping up to be a great time to invest in this market. But not all of the companies that are betting on IoT are doing so hot.
Namely, Fitbit (FIT), Intel (INTC -1.79%) and CalAmp (CAMP -3.00%) are trailing the S&P 500 over the past year. So does their current bad fortune translate into opportunities for investors? Let's take a look.
Image source: Getty Images.
The wearable-tech play
Fitbit is a leader in the wearable-technology space -- which is part of the broader IoT market -- right now, but its position hasn't translated into gains for its investors. The company's share price has fallen 62% over the past 12 months, as you can see from the chart below.
Fitbit data by YCharts.
A terrible holiday quarter had a lot to do with Fitbit's share-price drop. Revenue in the fourth quarter of 2016 fell 19.4%, from $711.6 million down to $573.8 million. That fall forced a net income loss of $146.3 million in the quarter and an earnings per share (EPS) loss of $0.56. The collapse of the top and bottom line came as sales for the company's fitness devices hit just 6.5 million in the quarter, down 20.7% year over year. Gross margin also tumbled from 48.9% in the year-ago quarter to just 22.1% in Q4 2016.
Fitbit didn't paint a rosy picture for the current quarter or the rest of 2017, either. Revenue will be between $270 million and $290 million in the first quarter, down from $505 million a year ago. And non-GAAP EPS will be a loss between $0.18 and $0.20. Topping it all off, the company expects full-year revenue to be between $1.5 billion and $1.7 billion, down from $2.17 billion in 2016.
There's no denying Fitbit's place in the wearable-tech market, but if investors are looking for a solid IoT bargain, they may want to look elsewhere. Wearables competition is only getting more intense, and as Fitbit is already failing to deliver solid gains when it has a dominant position in the space, I don't have much faith that the company will deliver when Apple and others are taking even more market share. That's why I'd be comfortable leaving this stock right where it is.
The emerging IoT player
Investors keeping up with Intel may wonder why the company makes it onto the battered IoT stock list, considering the company's share price is up more than 13% over the past 12 months. The problem for Intel's stock is that over that same period the S&P 500 has gained about 15%.
Intel data by YCharts.
This failure to beat the market lands Intel on the beaten-up IoT stock list, but it may not be all bad news for long. Intel recently made a bid to purchase Mobileye (MBLY), an Israel-based company that makes advanced driver assistance systems (ADAS) for automakers around the world.
Mobileye currently has about 70% of the ADAS market, and Intel is looking to add the company into its fold to help it boost its position in the driverless-car space. Connected cars and semi-autonomous vehicles are part of the broader IoT market, and Intel is betting that its $15 billion bid for Mobileye will give it a lot of runway in the space to sell more of its chips.
Intel's been focusing more on IoT as it looks for more revenue growth in the wake of the dwindling PC market. The company's IoT business was its fastest-growing revenue segment in 2016 (popping 15%), though it accounted for just 4.4% of total revenue.
The Mobileye acquisition, expected to close later this year, would be a huge step in the right direction for Intel as it would allow the company to boost sales of its processors and get its foot in the door of the driverless-car market, which is expected to be worth as much as $77 billion by 2035. With its strong IoT revenue growth and its Mobileye purchase, I think Intel's opportunities outweigh its recent misses -- making this stock a solid IoT bargain right now.
The IoT pure play
CalAmp makes equipment and software to connect industrial equipment -- like Caterpillar's earth-moving equipment -- to the internet. But CalAmp's stock has suffered for a while, dropping about 27% in 2016 and falling more than 7% over the past 12 months.
CalAmp data by YCharts.
But there are signs of life in this IoT pure play. The company made some modest revenue gains of 11.6% in fiscal third quarter 2017, and management is forecasting revenue growth of 15.7% year over year at the midpoint in the current fiscal fourth quarter.
The company believes some of the macro headwinds it faced last year are now behind it, and it's looking at revenue growth from one of its key customers, Caterpillar, in the coming year. Caterpillar contributed $6 million to Q3 revenue, and that figure is expected to increase to $7 million to $8 million in Q4 and into the next fiscal year.
CalAmp may be beaten-down now, but it's hard to ignore the company's potential in the Industrial Internet of Things. This market is expected to be worth $195.4 billion by 2022, according to research and consulting company MarketsandMarkets. There's certainly some risk with CalAmp's business being a pure play on the IoT, but that also means there's a lot of upside if the company can anticipate the market correctly. For that reason, I remain cautiously optimistic that CalAmp could be a strong long-term IoT play.
