Samsara is Thursday's IBD Stock Of The Day as the internet-of-things cloud company rises into a buy area amid an enterprise AI boom. Partly it may be basking in the glow of one of the day's hottest stocks, Monolithic Power Systems.
Investment in enterprise data systems to leverage generative AI capabilities, which is driving demand for MPWR chips, is right up Samsara's alley, though the San Francisco-based company approaches the challenge from the cloud. Samsara provides sensors and cloud-based software to manage vehicle fleets and other physical operations through its Internet of Things platform.
AI Play For Physical Operations
"Our customers are the world's leaders in construction, food and beverage, transportation and warehousing, public sector, agriculture and more," Samsara CEO Sanjit Biswas said on the Nov. 30 fiscal third-quarter earnings call.
Samsara, he says, is "building the only system of record for physical operations to address this market," collecting data from vehicles, equipment, sites, workers and other connected assets. It then aggregates the data to solve customers' problems with "AI-powered insights."
For example, Samsara's Q3 shareholder letter discussed a new relationship with the largest low-cost airline to help it more efficiently use equipment. "We gave them visibility into their fleet utilization," the company said. Based on results for an initial pilot, Samsara estimates more than $15 million in annual cost savings, partly due to lower maintenance costs and better fuel efficiency.
Samsara Hits $1 Billion In Recurring Sales Amid AI Boom
In Q3, Samsara saw 40% sales growth, a mild deceleration from 43% growth the prior two quarters. Annual recurring revenue topped $1 billion, up 39% from a year ago.
Further, two vehicle-based applications, safety and telematics, each represented more than $400 million in annual recurring revenue. Tracking vehicle usage and location, including suggesting better routes, is how Samsara got its start. But it continues to branch out. Equipment monitoring crossed $100 million in annual recurring revenue, and its newest application, "mobile experience management," just topped $1 million.
Meanwhile, major customers seem to want more. Samsara said its retention rate for large customers was 120% in Q3.
Recently Samsara became profitable, with adjusted earnings per share of 1 cent and four cents in the last two quarters.
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Samsara Stock
Amid the AI boom, Samsara stock darted up 5.7% to 34.27 in Thursday afternoon stock market action. IOT stock sprang off support at its 50-day moving average, heading for a break of the down-sloping trendline from its Dec. 14 high. Investors could use today's move, or a move past 35.18, as an early entry point.
IOT stock has an official buy point of 36.91 from a consolidation. Samsara is part of IBD's Computer Software-Enterprise group, which ranks No. 11 out of 197 industries, based on stock performance and momentum. The Relative Strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, is not far off an all-time high for the December 2021 IPO.
MPWR, the No. 2-performing S&P 500 stock on Thursday, surged 15.6%, well out of a buy zone.
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