Read on to discover:
- How a new product serving a massive market could benefit Insulet.
- Why connecting the world through a new satellite service may send Iridium soaring.
- Why "smart" advertising may power profits at Trade Desk.
This fast grower is on the cusp of an important new product
Todd Campbell (Insulet): There are over 1 million people living with type 1 diabetes and 30 million with type 2 diabetes in the U.S., and many of them are eager for new treatment solutions that reduce fingersticks and insulin injections.
Insulet's Omnipod, a popular insulin pump, doesn't require wires, and that's made it a favorite of type 1 and type 2 patients who require an intensive insulin therapy. The Omnipod's ability to reduce patient burden has allowed the company to grow its revenue significantly and make the jump to profitability. Sales have grown at a compound annual rate of over 20%, and gross margin has improved 20% since 2013. In 2018, the company should post operating margin in the low-single-digit percentage, but management thinks it will produce above-market profitability as soon as 2021.
The opportunity for market-share growth and a new automated insulin-delivery system are two big reasons why management is increasingly excited about the company's future. So far, Insulet pegs market share below 6% in type 1 and between 1% and 2% in type 2 diabetes. Given how many people have diabetes, every additional point in market share could translate into significant revenue.
The future of treatment, however, isn't insulin pumps alone. Automated systems that pair pumps with continuous glucose monitors and sophisticated software to eliminate fingersticks and insulin injections altogether appear to be where this market is heading. Insulet could conceivably have an automated device on the market in a year or two, putting it in a great position to challenge competitors, including Tandem Diabetes and Medtronic.
Overall, management is guiding for revenue to climb to $1 billion in 2021 from roughly $560 million in 2018, making the stock a top mid-cap investment to consider.
A global satcom reports "Mission: Complete"
Nicholas Rossolillo (Iridium Communications): Iridium Communications recently launched the last batch of its new satellites into orbit, completing a multiyear, $3 billion project that upgrades the company's existing mobile voice and data services. Now that the new hardware is in place, Iridium says it will have a decade or more of "capital expenditure holiday" where new services and resulting revenues will be enjoyed from the long-awaited deployment of the satellites.
Iridium has long boasted that its new satellite constellation, dubbed NEXT, would be the world's most advanced for communications purposes. Adding to a voice and data service that already spans the globe, the company went live with the only broadband internet service that covers every spot on the planet -- designed for remote communication and tracking of business assets, autonomous vehicles, trains, planes, and craft at sea. That broadband internet connection is enabled by the completion of NEXT and puts Iridium in prime position to service multinational companies and government entities.
However, with the launch of new technology, there's always risk that customer adoption will be weak and that the investment won't pay off. For investors who might shy away from Iridium because of that uncertainty, consider that ahead of its new constellation's completion, Iridium was already reporting strong growth in users and number of connections. Through the first three quarters of 2018, revenue was up 18% year over year. That figure was driven by expansion in Internet of Things (IoT) services -- data and asset tracking for connected devices. Commercial connections had increased 26% from the year prior, while government IoT connections rose 24%.
Now that Iridium is finished with the construction phase of its project and can focus its operations on providing communications service, user growth probably will continue. With an enterprise value of only $3.9 billion as of this writing, there could be plenty of upside for this stock in the years ahead.
The Trade Desk solves the biggest problem in advertising
Jamal Carnette, CFA (The Trade Desk): U.S. advertising is undergoing the biggest industry shift since the advent of television: Digital advertising -- search, desktop, and mobile -- is eclipsing traditional television spending as consumers spend more time online. Unfortunately, the online advertising industry is rife with ineffective spending, concerns about brand safety, and in some cases, outright fraudulent impressions.
This is where The Trade Desk comes in: Its programmatic digital advertising marketplace partners with brands to reach their audience in real time with more personalization and targeted precision than other digital marketing campaigns. This helps brands improve the effectiveness of their ad spend while limiting fraud and ensuring brands are comfortable with the sites their ads are displayed on.
Trade Desk has found a receptive audience: In the recently released third-quarter earnings, the company reported 50% revenue growth. More importantly, the company reported a 95% customer retention rate for the 19th straight quarter, and approximately half of Ad Age's top 200 brands -- marketing's heavy spenders -- with existing contracts increased their spend with The Trade Desk by more than 50%. The Trade Desk has a long runway for growth as digital advertising continues to grow and brands look for more value from their online ad spending.
Jamal Carnette, CFA has no position in any of the stocks mentioned. Nicholas Rossolillo owns shares of Iridium Communications. Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends The Trade Desk. The Motley Fool owns shares of Medtronic. The Motley Fool recommends Insulet. The Motley Fool has a disclosure policy.