The Internet of Things (IoT) connects billions of devices -- including cars, wearables, cameras, and industrial machines -- to each other and the cloud. These connections enable devices to be remotely monitored and controlled, as well as collect information for making data-driven decisions.

The global IoT market is projected to grow from $381.3 billion this year to $1.85 trillion in 2028, according to Fortune Business Insights, as more devices come online. To profit from that growth, investors should consider buying these three IoT stocks: Impinj (PI -4.72%), Skyworks Solutions (SWKS -1.55%), and Sierra Wireless (SWIR). Let's take a closer look at them.

Wireless connections across a city.

Image source: Getty Images.

1. Impinj

Impinj is a leading producer of radio frequency identification (RFID) chips, readers, and software. Companies use Impinj's RFID chips to track their inventories and optimize their supply chains, while retailers use them to track shipments, catch shoplifters, and analyze sales trends.

Impinj's technology connects many non-digital products, such as clothing, to the internet. The strongest catalyst for its business in recent years was arguably Amazon, which forced brick-and-mortar retailers to aggressively track their sales trends to stay competitive.

Impinj's revenue fell 9% to $138.9 million last year as the pandemic disrupted its orders from retailers. It also posted a non-GAAP net loss of $12.8 million -- compared to a profit of $918,000 in 2019.

However, analysts expect Impinj's revenue to jump 26% this year with a much narrower loss as the pandemic passes. Over the long term, demand for Impinj's RFID products should continue rising as companies link all of their products to cloud-based services which can crunch all that data.

Impinj still faces competitors like NXP Semiconductors (NXPI -1.93%) in the RFID market, but Research and Markets expects the global RFID industry to grow at a compound annual growth rate (CAGR) of 10.2% between 2021 and 2026 -- so there could still be room for these chipmakers to grow without trampling each other.

Impinj only has an enterprise value of $1.2 billion, and it trades at less than seven times that figure. That's a reasonable valuation for a small-cap company with plenty of upside potential.

2. Skyworks Solutions

Skyworks is often associated with Apple (AAPL -1.22%), which accounted for over half of the wireless chipmaker's revenue last year. But Skyworks also produces other wireless chips for the mobile, automotive, home automation, wireless infrastructure, defense, and industrial markets.

A passenger reads while seated in a driverless car.

Image source: Getty Images.

As data connections improve between these devices, they'll need more Skyworks chips. For example, Skyworks expects nearly three-quarters of all cars to ship with cellular connectivity by 2024, and for each driverless car to use $50 in radio frequency chips.

That's why Skyworks agreed to buy Silicon Laboratories' (SLAB -1.97%) infrastructure and automotive unit for $2.75 billion in April. The acquisition will boost its exposure to the automotive market, help it profit from next-gen technologies like connected and driverless vehicles, and reduce its overall dependence on Apple.

Skyworks has also repeatedly told investors it will gradually expand beyond mobile devices into smart homes, smart factories, and wearables. In other words, it's a well-rounded way to profit from the long-term growth of the IoT market.

Skyworks' revenue and non-GAAP earnings both dipped 1% last year as Apple sold fewer iPhones and the pandemic disrupted multiple markets. However, analysts expect its revenue and earnings to surge 49% and 68%, respectively, this year as the pandemic passes, Apple sells more 5G devices, and it benefits from content share gains in other IoT-oriented industries.

Those are impressive growth rates for a stock that trades at just 16 times forward earnings. It also pays a decent forward yield of 1.2%.

3. Sierra Wireless

Sierra is the world's top manufacturer of embedded M2M (machine-to-machine) modules and gateways, which enable devices to "talk" to each other across networks. It serves a wide range of customers across the transportation, networking, energy, and mobile computing markets.

Sierra acquired a long list of smaller wireless chipmakers -- including Mobiquithings,, Numerex -- to maintain its lead, broaden its portfolio, and continue expanding. It also divested weaker segments, like its automotive business, to focus on higher-growth markets.

Sierra's revenue fell 18% to $448.6 million last year, due to pandemic-related disruptions, lower module sales to the mobile computing market, and tight component supplies in the second half of the year. Its non-GAAP net loss widened from $6 million to $51 million.

Those numbers look awful, but analysts expect Sierra's revenue to rise 8% this year with a narrower loss as the pandemic passes and the 5G market expands. Sierra's near-term growth might seem unimpressive, but it has an enterprise value of just under $500 million -- which is barely higher than its expected sales of $484 million this year.

That low valuation, along with Sierra's leadership of the M2M modules space and the long-term growth potential of the IoT market, could make it a lucrative takeover target for bigger tech companies.

The bottom line

The IoT market might not be as appealing to growth-oriented investors as the cloud or AI markets, but it provides the connective tissue that tethers actual objects and devices to those services.

Many of these stocks -- such as Impinj, Skyworks, and Sierra -- are also more reasonably valued than the market's favorite cloud and AI stocks. Therefore, investors who are looking for a better balance of growth and value should take a closer look at these three companies and their oft-overlooked peers.