This is why SW is up !
Wednesday, October 06, 1999
Sierra Wireless on the move again
Stephen Miles
Financial Post "HOT STOCK SECTION"
Shares of fast-growing wireless data communications equipment maker Sierra Wireless Inc. are poised to continue their march higher.
The Richmond, B.C.-based firm's stock (SW/TSE), which rocketed from about $13 to a record high of $19 last month, is on the move again after a brief pause to catch its breath. The shares closed at $16.75 yesterday, up 46% from their 52-week low of $11.50 in July.
Positive comments from analysts and a hunger for all things wireless by investors are the driving force behind the recent gains.
Sierra Wireless makes PC cards for portable computers, "ruggedized" vehicle-mounted modems, modules for embedded applications, telemetry modems and software tools and utilities.
But it is the wireless segment of its business that has investors particularly excited.
There are some important trends shaping the wireless data industry that are spurring stellar growth, including convergence of lower-cost portable computing devices and lower cost public wireless communications services. Other factors driving booming demand in the sector, the company says, are the growth of the Internet and intranets for enterprise-wide information transfer and increasing importance of any-place, any-time data transfer and retrieval for professional mobile workforces, for improved productivity and customer service enhancement.
Analysts say Sierra is strategically positioned to capitalize on explosive growth in the industry.
The company's main products are its AirCard wireless modems and rugged wireless communication stations that allow vehicles such as police cars, taxis and delivery trucks to exchange simple text messages. It is also the leading supplier of cellular digital packet data radio modules in North America, with about a 50% market share.
The firm is now evolving beyond its traditional customer base to take wireless data communications into mainstream business. Additional areas targeted for expansion include electronic commerce and the insurance and utilities industries.
Sierra's products allow business professionals to network their laptop computers with a main server back at the office.
Normally, you have to plug a telephone cable into your computer to access e-mail, send files back to the office, or even surf the Internet. But the company's AirCard modem enables laptops to transfer data over cellular phone networks without the need to plug into a traditional, land-based phone jack. The net result is your computer becomes as free and portable as a PCS telephone.
Nomadic executives and sales representatives have seized on the modems, driving Sierra's revenue to $26.4-million last year from just $340,921 in 1994, the firm's first year in business. That leap of 7,644% makes Sierra Wireless Canada's fastest growing high-tech company.
The company was recognized for the feat by being awarded top honours in the 1999 Canadian Technology Fast 50 program, an annual ranking by Deloitte & Touche of the 50 fastest growing companies in Canada.
Sierra Wireless reported strong growth in revenue and earnings in the second quarter. In the three months ended June 30, 1999, revenue climbed 37.3% to $9-million, from $6.6-million in the same period a year earlier. Net income jumped 38.3% to $802,000, or 6½ a share, from $580,000 or 5½ in the second quarter of 1998.
Sierra cited growing demand for its wireless data products, including new products that started commercial shipments in the first quarter, for the profit jump.
"This is an exciting time for Sierra Wireless," said David Sutcliffe, the company's chief executive. "The market for wireless data products is growing, and we are participating in this growth."
Analysts have been quick to climb aboard the Sierra Wireless juggernaut.
Michael Urlocker, an analyst at Scotia Capital Markets, issued a "buy" rating on the shares in July. He was recently joined by Ray Sharma, an analyst at Credit Suisse First Boston Corp., who initiated coverage of Sierra Wireless with a "buy" rating on Sept. 16.
Mr. Urlocker has a 12-month target price of $19 on the shares while Mr. Sharma is a little more conservative at $18.
But at its present rate of ascent, Sierra stock could reach their targets long before then.
Mr. Sharma said in his report that he expects Sierra to continue its strong growth rate. Revenue is expected to climb 44% in the next two years to $55-million.
"Revenues for Sierra Wireless grew 104% in fiscal 1998 and are expected to grow a further 44% in [fiscal] 1999 to $38-million as the company executes on numerous wireless data opportunities," Mr. Sharma said.
The firm is strategically positioned to benefit from the transition of packet overlay and proprietary wireless data networks to data over digital wireless networks, he said. Execution in the cellular digital packet data market "provides upside potential to our current revenue estimates."
Sierra Wireless Inc.
CEO:David Sutcliffe
Ticker: SW
Listed: Toronto Stock Exchange
Head office |
