Internet Of Things Companies

This article was updated on Oct. 4, 2016. It was originally published on April 9, 2016.

Internet of Things (IoT) stocks can often be tricky companies to pin down. That's because even though the IoT is already here, its full potential still hasn't remotely been realized. And that's left some investors leery of IoT stocks. 

But the IoT's potential means that some of today's poor-performing tech companies could turn into major winners down the road.

Let's take a look at three stocks that still have lots of time to benefit from the ubiquitous connectivity revolution.

Ambarella

If you've been keeping up with the action-camera market -- and specifically GoPro's stock -- then you've likely heard of Ambarella (NASDAQ:AMBA). The company provides the video-processing semiconductors for GoPro's cameras, which has been both a good and bad thing at times.

Ambarella's gets about 30% of its total revenues from sales of its system-on-a-chip (SoC) to GoPro. Lately, Ambarella's stock price has been pushed up after it beat Wall Street's recent quarterly predictions and, more importantly, the price rose on the hope of strong sales from GoPro's new HERO5 camera. The company's stock price is up nearly 32% year-to-date.

But Ambarella has a lot going for it aside from GoPro. The company makes video-processing tech for drones, security cameras, and automotive cameras -- and these markets are all areas poised for big growth. Body-worn cameras for police officers have become a $1 billion market, automotive cameras are estimated to be an $11 billion market by 2020, and the commercial drone market is estimated to be worth more than $6 billion just four years from now.

Ambarella's fate is still somewhat tied to GoPro right now, but the company has lots of potential to bring in revenue from outside the action-camera market. And if GoPro's new line of products start winning over consumers again then Ambarella could certainly benefit from that as well. 

ORBCOMM

Don't let ORBCOMM's  (NASDAQ:ORBC) 1980s-sounding name fool you -- the company is on the forefront of the latest Internet of Things connections. 

ORBCOMM has one of the world's first and only commercial satellite networks for machine-to-machine connections. Its satellites allow industrial, shipping, energy, and utility sector companies to stay in communication with their mobile and fixed connections. For example, Lockheed Martin's aeronautics division uses ORBCOMM's Internet of Things connections and platform to track some of its equipment. 

ORBCOMM's 2015 revenues were up 85%, and the phenomenal growth of the Internet of Things could help push them higher. Cisco Systems estimates that by 2020, there will be 50 billion things connected to the Internet -- and they'll all need connections similar to those ORBCOMM is already providing. Perhaps that's why its stock is up more than 38% since the beginning of the year. 

Sierra Wireless

Sierra Wireless (NASDAQ:SWIR) has had a series of misses lately, there's no doubt about that. The company saw revenues decline by 1.1% year-over-year in the second quarter and revenue for the company's OEM Solutions unit (where Sierra gets the majority of its revenue) fell by 4% year over year.

But the Internet of Things is just getting started, and Sierra is still a leader in the embedded wireless module space. The company's tech can be found in everything from connected coffeemakers to Tesla Motors' all-electric vehicles.

The wireless embedded hardware and software market is projected to be worth $214 billion by 2020 and Sierra currently has 33% revenue market share in the embedded machine-to-machine (M2M) module business. The company's management recently said that new customer additions in China will grow long-term revenues, but investors will likely have to be patient to see some of those materialize. 

Just as ORBCOMM will benefit from the 50 billion things connected the Intent by that time, so will Sierra Wireless.

Foolish thoughts

Investors shouldn't expect an easy ride for these companies. Sierra and Ambarella will likely have to travel some rocky roads before they start seeing growth again, and ORBCOMM's current growth rate isn't guaranteed to continue. But each of these companies is making significant plays in growing IoT markets, and they're well worth the consideration of investors. 

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ambarella, GoPro, Sierra Wireless, and Tesla Motors. The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.