William Blair initiated research coverage of Sierra Wireless, Inc. (SWIR $16.45), a preferred IoT solutions provider that combines edge devices (e.g., cellular routers/gateways and modules), connectivity services, software, security, and a secure cloud platform to simplify IoT deployments.
Analyst Alessandra Vecchi estimated the company would generate revenue of $586.3 million in 2022 and $643.7 million in 2023, with potential for low- to midteens EBITDA margin over the long term.
“Sierra is in the early stages of a turnaround,” Vecchi said. “It began with overhauling the board and management team, which now collectively boast extensive expertise in unlocking revenue growth, profitability potential, and shareholder value. We believe the board and CEO Phil Brace are focused on establishing sustained profitability by improving margins and divesting noncore businesses within IoT services. Brace has already streamlined Sierra’s management and operational teams, increased pricing, and expanded the manufacturing footprint. His additional targets include improving design for manufacturing, creating a clear product roadmap, and improving R&D and sales-and-marketing efficiency per dollar spent. These initiatives should help drive sustained profitability.”
Vecchi continued, “We believe Sierra’s broad portfolio of cellular modules, gateways, and routers, as well as its growing connectivity and solutions business, positions the company well to capitalize on Industry 4.0 trends, including an increasing desire to connect endpoint devices to the network. In addition, Sierra appears poised to capitalize on its position as the trusted Western provider in a heated geopolitical environment that continues to get hotter. We expect end-to-end security concerns to be a tailwind to revenue as industrial customers, in particular, may reconsider any reliance on foreign vendors.”
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