Samsara is the IBD Stock of the Day as shares break out from a double-bottom base following its second-quarter earnings report. With Friday's gain, IOT stock has soared 144% thus far in 2023, leading some analysts to be cautious about the company's value.
On the stock market today, Samsara stock popped 13.1% to close at 30.93.
Founded in 2015, Samsara provides sensors and cloud-based software to manage vehicle fleets and industrial operations. Further, its Internet of Things platform provides global positioning tracking for trucks, and monitors routes and vehicle performance.
Samsara's second-quarter earnings and revenue topped Wall Street targets amid strong growth in large accounts. Annual recurring revenue from subscriptions also came in ahead of views, rising 40% to $930 million while Wall Street projected $910.3 million.
Further, Samsara notched its first positive quarter in adjusted free cash flow.
Samsara's Double Bottom Base
While shares have soared in 2023, IOT stock pulled back in mid-June and again in mid-July. That formed a double-bottom base. IOT stock's entry point was 29.79.
The double bottom looks sort of like the letter "W." It features two distinct sell-offs. After hitting a low point, the stock will rally back near its 52-week high, then stumble and fall again. The second low should undercut the first low.
The process often results in flushing out the weak shareholders. They surrender shares to others who have strong conviction in the company.
After the second sell-off, the stock finds its footing again.
IOT Stock: Co-Founders Strike Again
Sanjit Biswas and John Bicket cofounded Samsara in 2015. Earlier they founded Meraki, a Wi-Fi and cloud networking startup. They sold Meraki to Cisco Systems for $1.2 billion in 2012.
Samsara began by selling fleet management software in the transportation industry. Leveraging Global Positioning System technology along with telematics — sensor data gathered from trucks — Samsara helped customers monitor routes and vehicle performance so they could save money on preventive maintenance and fuel usage.
From there, Samsara in 2018 expanded into video-based safety products. Further, these enabled fleet customers to lower vehicle insurance costs.
In-cab, dual-facing cameras provide real-time video streaming. Also, artificial intelligence software at cloud data centers detects high-risk behavior, such as distracted driving and lane departure.
Samsara gets about 80% of annual recurring revenue, or ARR, from subscription services through vehicle telematics and video-based safety. Outside of transportation, it's focused on sectors such as energy and manufacturing, food and beverage, and state and local governments.
More recently, Samsara has targeted another market — monitoring industrial equipment and government operations with its "Internet of Things" platform. Samsara IoT data sensors and video cameras monitor activity at construction sites or factory floors.
IOT Stock: Valuation An Issue?
At BMO Capital Markets, analyst Daniel Jester has a neutral rating on IOT stock amid its lofty valuation.
"We see the company as well positioned within fleets and its video-based safety, telematics, and workflow application families which drive compelling ROI/safety benefits for truckers, site managers and operators," he said in a report.
"Yet on the margin, the macro (economy) is likely to get more difficult as 2023 progresses. We see shares reasonably valued given the likely financial profile of the business in 2023."
As of July 30, Samsara said it had 1,515 customers topping the $100,000 level in annual recurring revenue, up 53% from a year earlier.
In vehicle telematics, Samsara competes with Verizon Communications, Trimble, Solera Fleet Solutions (Omnitracs), Motive, and Orbcomm. In IoT markets, Samsara competes with Johnson Controls, Motorola Solutions' Avigilon division, Honeywell and Verkada.
At SVB MoffettNathanson, analyst Sterling Auty holds a buy rating on Samsara stock.
"Even with Samsara reporting another beat-and-raise, we continue to like the numbers setup in the back half of the year," Auty said in a recent note to clients. "We see Samsara being in the early innings of a multiyear journey to help companies go through a digital transformation of physical operations."
Samsara Technical Ratings
Also, IOT stock holds an IBD Composite Rating of 95 out of a best possible 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better. It has a Relative Strength Rating of 98.
Further, IOT stock has an Accumulation/Distribution Rating of B-plus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
