Why Sierra Wireless Stock Popped Today

By Steve Symington Markets Fool.com

Image source: Sierra Wireless.

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What happened

Shares of Sierra Wireless (NASDAQ: SWIR) were up 9% as of 3:50 p.m. EST Monday after an analyst upgraded the Internet of Things specialist's stock.

So what

Raymond James' Steven Li upgraded Sierra Wireless to outperform from market perform early in the day, and simultaneously increased his price target to $20 from $16. To justify his bullish stance, Li cited his belief that Sierra Wireless is poised to enjoy relative strength this year both as original equipment manufacturer (OEM) buying patterns return to normal, and as its low-cost, low-power Cat-M1 and Cat-NB1 solutions gain momentum and enable the propagation of novel Internet of Things applications.

Now what

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I can't argue with Li's reasoning. When Sierra Wireless introduced its new AirPrime HL and WP series cellular modules for Cat-M1 and Cat-NB1 late last year, the company specifically noted they would support the 3GPP standard for low-power wide-area (LPWA) technologies.

"LPWA will greatly expand cellular's IoT market because it was specifically designed to meet the cost, power and coverage requirements for not only traditional markets but also new, untapped markets for IoT applications," explained Dan Shey of ABI Research at the time. "As the market share leader in cellular modules, Sierra Wireless is well positioned to help their customers execute on the new business models and opportunities that LPWA will bring."

Meanwhile, less than two weeks ago I singled out Sierra Wireless' OEM solutions as its most disappointing business segment in 2016, namely as macroeconomic uncertainty resulted in softer-than-expected demand from existing OEM customers. As I wrote at the time, Sierra Wireless most recently told investors to expect this demand to stabilize in the fourth quarter, with continued momentum from new OEM customer programs helping the company to return to sustained year-over-year growth. As Li's upgrade highlights this positive shift, it's no surprise to see shares of Sierra Wireless trading higher today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Sierra Wireless. The Motley Fool has a disclosure policy.