Sierra Wireless is a risky stock right now, this portfolio manager says

With its connected tech helping usher in the Internet of Things, chip maker Sierra Wireless (Sierra Wireless Stock Quote, Chart TSX:SW) is in the right place at the right time, says money manager Bruce Murray, but whether or not the company can deliver in the fast-evolving sector is still up for grabs.

Earlier this month, Vancouver-based Sierra, which makes sensors and embedded tech, delivered quarterly numbers that were light compared to previous results but nonetheless came in as expected. Revenue was down seven per cent year-over-year and the company posted a loss of $11.2 million over its fiscal Q1 2019.

CEO Kent Thexton, new to the helm since October of last year, said this company is still working through growing pains.

“We are making good progress driving improved efficiency throughout our operations to accelerate our transformation into a leading global IoT solutions provider,” said Thexton, in a press release. “At the same time, we are investing in innovative cellular technologies and capabilities to enhance our differentiated Device-To-Cloud offering and grow our recurring subscription-based revenue.”

While initially optimistic about the results, the market ended up neither here nor there on Sierra’s quarter, a rare show of restraint in comparison to the volatility more characteristic of the stock in recent years, where news items have caused wide swings in SW’s share price.

That’s par for the course when you’re dealing with an emerging technology, said Murray, CEO of the Murray Wealth Group, to BNN Bloomberg on Thursday.

“Sierra Wireless makes the end pieces for the Internet of Things and they’re leading in putting sensors and communication devices for this sort of stuff,” Murray says. “The company has struggled. It has been promising for a number of years, and the stock charges up and then sells off when they don’t deliver. They’ve gotten more aggressive management in the company in the last six months.”

“We do not own it at the moment but we’re starting to do our homework on it. It could be an exciting company to own for the next three to five years. But it is risky,” he says.

Overall, Sierra’s share price has been on a downward trend for a couple of years now, having hit a recent high of $43.00 in 2017 and then tumbling over the ensuing stretch to where it now trades in the $16 to $17 range. Year-to-date, the stock is down seven per cent.

“They make chips, and chips can be replaced — somebody could come out with a faster, better chip,” says Murray. “It’s technology and technology moves quickly. You have to make sure that the company you’re investing with is at the leading edge and that they’re right on top of it.”