Sierra Wireless' (NASDAQ:SWIR) fortunes on the stock market have taken a turn for the worse since the beginning of August, when the company announced a significantly dilutive stock-for-stock merger with Numerex. The deal is expected to close in the coming weeks. Sierra Wireless has fallen spectacularly from its 52-week highs of around $32 per share, losing roughly a third of its its market capitalization in the past six months, despite consistently strong results.

Sierra once again reported better-than-expected results on Nov. 2 and issued  guidance that was in line with what analysts were expecting, but this failed to lift the sentiment on Wall Street. However, investors should ride out this phase of stock price weakness since Sierra Wireless is built for long-term gains, as indicated by key takeaways from the latest earnings call.

Icons, such as a camera, a smartphone, and a car, drawn in white to represent different components of the Internet of Things.

Image Source: Getty Images

OEM solutions' turnaround is on track

The company's OEM (original equipment manufacturer) solutions division supplies close to 80% of Sierra's total revenue. This business was struggling earlier this year, but the company's latest quarterly results indicate that its turnaround is on track.

Sierra's revenue from OEM solutions increased 8% year over year during the latest quarter thanks to the addition of new customers across fast-growing segments such as automotive and mobile. More importantly, management believes that this business will keep getting better because of recent product introductions to target fast-growing end markets.

For instance, Sierra's AirPrime LPWA (low-power wide area) device that was launched last quarter is now being tested by leading carriers in North America. This is an IoT-specific device that supports both Cat M1 and NB1 data transmission bands, the two widely used standards used by IoT devices to communicate with each other.

This module could deliver big gains for Sierra by helping it tap the fast-growing LPWA connectivity space. According to Machina Research, LPWA connections are set to grow from just 59 million last year to 3 billion in 2025, opening up a $19.5 billion revenue opportunity. This isn't surprising as LPWA modules will form the basis of IoT because they can last for years, allowing devices to communicate in a cost-effective manner with very little maintenance.

Therefore, the adoption of Sierra Wireless' LPWA modules by carriers could substantially boost its top line in the long run. The automotive business will provide another opportunity for Sierra to enhance its OEM solutions business.

Automotive will step on the gas next year

Sierra CEO Jason Cohenour said during the company's earnings call with analysts that Volkswagen (OTC:VWAGY) will buy Sierra connectivity chips in large volumes for its cars from the second half of next year. The German car giant had selected Sierra's 4G LTE chips earlier this year to enable high-speed connectivity for powering its Car-Net platform.

This platform will give Volkswagen owners a wide range of functions including in-vehicle connectivity services, roadside assistance, and remote vehicle access. More specifically, Sierra will be supplying two types of modules to Volkswagen, which means that it can cover the majority of the German automaker's models across the globe. According to Cohenour (via Seeking Alpha's earnings call transcript):

We won two programs with Volkswagen, one, call it, high-end 4G; and one, call it, little bit lower-end 4G. Our expectation around those two programs is that they will be addressing the meat of the VW product line. So think of that as most VW models and in every region in the world. So it's most models and its most countries where the VW operates. So I would say it's a very broad exposure to Volkswagen.

Additionally, Sierra recently won a third program at Volkswagen to provide connectivity modules for the automaker's electric vehicle program.

Volkswagen usage of Sierra chips is a ringing endorsement of the latter's technology, so it won't be surprising if the chipmaker ropes in more automotive clients. This will help Sierra cut its teeth in the fast-growing automotive IoT market that's expected to be worth $82 billion by 2022.

Not surprisingly, analysts expect Sierra's annual earnings growth rate to almost double over the next five years to 13%. By comparison, the company's bottom line has grown at a CAGR (compound annual growth rate) of 7% over the last five years, so investors should take advantage of any stock price weakness as Sierra seems set for long-term growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. 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.