There are plenty of mixed feelings regarding InvenSense (INVN) and its potential in the mobile industry and the burgeoning Internet of Things, or IoT. Goldman Sachs had the company on its America's Buy List since 2011, then dropped it in August. The same firm listed InvenSense as a top IoT stock in June. Meanwhile, Canaccord believes InvenSense is a buy because of its massive potential to sell gyroscopes to smartphone manufacturers in China.

While smartphone components could drive growth, the real opportunity for InvenSense might be with the Internet of Things.

The current position
You probably come into contact with the company's stalwarts every day and don't even realize it. InvenSense technology is found in Samsung's Galaxy S5 flagship smartphone and its Gear smart watches, the LG G3 smartphone, and even Apple's new iPhone 6 lineup. 

When you turn to your phone for a game or to take a picture, a sensor in the smartphone keeps track of how the device moves so apps can respond accordingly. This is called a micro-electro mechanical system, or MEMS, and is essentially a gyroscope that tracks motion in your smartphone. InvenSense makes and designs the sensors and software that make features like this possible, and they do it for the most high-profile tech companies.

Though smartphone sensors make up a majority of InvenSense's business, they are also a popular component for wearable manufacturers. Samsung uses the company's gyroscopes for its Gear, Gear 2, and Gear Live smart watches and Google uses InvenSense's nine-axis MPU-9150 motion sensor in Google Glass. InvenSense's gyroscope and accelerometer are also in the new LG G Watch.

According to Canaccord's Matthew Ramsey, InvenSense could tap into a lot of sensor potential in China, as companies like Xiaomi put more gyroscopes into smartphones. This past quarter Xiaomi made up about 10% of InvenSense revenue.

Ramsey recently wrote, "We believe gyroscope penetration is only roughly 20% within the Chinese OEM handset base today and growing quickly as Chinese OEMs look to compete against Apple, Samsung, and other global brands with the launch of 4G mobile networks in China."

But smartphones and wearables are only part of InvenSense's potential.

A bigger IoT opportunity
The transition from smartphones to wearables and expanding within the Internet of Things should be a natural progression for InvenSense. To know where a company is headed, most of the time you need to look no further than its CEO.

In a recent interview, InvenSense CEO Behrooz Abdi made it clear the company's Internet of Things ambition is bigger than just smart watches and Google Glass. "Our goal is that our sensors will be in just about anything that moves,"  Abdi said.

To help make this transition, the company has a developer program that is 15,000 strong right now. The idea is to offer inexpensive technology and software to developers who will then go out and use current InvenSense technology to create new IoT devices.

Abdi went on to say, "This is one of the technologies that is truly a multi-decade opportunity and if you look at that -- if you look at the Internet of Things and if you look at everything being connected -- the Internet of Things is really about the Internet of sensors."

But its not just Abdi who's bullish on InvenSense's place in IoT. Canaccord thinks there's lots of potential for the company in the Internet of Things market, with Ramsey saying, "We believe investments in fabless MEMS manufacturing, leading sensor data interpretation software libraries, and in products tailored for wearable/IoT applications position the company for sustainable growth that outpaces peers and to defend its market share."

Talking about Internet of Things devices in a Barron's report back in July, columnist Tiernan Ray said, "For other chip vendors, such as sensor makers InvenSense and OmniVision Technologies, the IoT offers a million new uses for the cutting-edge technology they have developed."

Foolish thoughts
InvenSense's stock has been hit hard recently after reports that Apple may be splitting sensor supply between InvenSense, STMicroelectronics, and Bosch for its iPhones. The possible supplier split spooked some investors away from the stock recently, but I think they're missing the company's potential opportunities.

InvenSense is already one of the main sensor supplies for the largest mobile and wearable companies in the world. As those business slowly transition to more IoT devices, I think InvenSense could benefit. The company said the market for motion and microphone sensors for high-end devices is about $1 billion right now, but could be about $7 billion-$8 billion over the next five years. Meanwhile, InvenSense is looking beyond motion sensors, to C02 sensors, chemical sensors, and others.

As the Internet of Things is still growing, the potential for stocks in the space is both huge and unpredictable. Investors should be cautious when evaluating IoT investments, but I think InvenSense is worth a closer look.