Analysis of IBD Stock
The shares have broken out of a double-bottom base with a buy point of 29.79
The stock has surged 144% so far in 2023, raising questions about its value
The Composite Rating stands at 95 out of 99; the Relative Strength Rating is 98
- The data is not real-time. All data displayed was recorded at 12:36PM EDT on 09/01/2023.
Samsara (IOT) is the IBD Stock of the Day as it breaks out from a double-bottom base after its second-quarter earnings report. With the gain on Friday, IOT stock has surged 144% so far in 2023, causing some analysts to question the company's value.
On the stock market today, Samsara stock jumped 13.1% to close at 30.93.
Established in 2015, Samsara offers sensors and cloud-based software to manage vehicle fleets and industrial operations. Moreover, its Internet of Things platform provides global positioning tracking for trucks, and monitors routes and vehicle performance.
Samsara's second-quarter earnings and revenue exceeded Wall Street expectations due to strong growth in large accounts. Annual recurring revenue from subscriptions also surpassed predictions, increasing 40% to $930 million while Wall Street estimated $910.3 million.
Additionally, Samsara recorded its first positive quarter in adjusted free cash flow.
Samsara's Double Bottom Base
Although shares have surged in 2023, IOT stock retreated in mid-June and again in mid-July. This formed a double-bottom base. The entry point for IOT stock was 29.79.
The double bottom resembles the letter "W." It features two distinct sell-offs. After reaching 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.
This process often leads to the elimination of weak shareholders. They surrender shares to others who have strong conviction in the company.
After the second sell-off, the stock regains its stability.
IOT Stock: Co-Founders Strike Again
Sanjit Biswas and John Bicket co-founded Samsara in 2015. Previously, they founded Meraki, a Wi-Fi and cloud networking startup. They sold Meraki to Cisco Systems (CSCO) for $1.2 billion in 2012.
Samsara initially sold fleet management software in the transportation industry. Utilizing Global Positioning System technology along with telematics — sensor data collected from trucks — Samsara helped customers monitor routes and vehicle performance to save money on preventive maintenance and fuel usage.
From there, Samsara expanded into video-based safety products in 2018. These products enabled fleet customers to reduce vehicle insurance costs.
In-cab, dual-facing cameras offer real-time video streaming. Also, artificial intelligence software at cloud data centers detects high-risk behavior, such as distracted driving and lane departure.
Samsara generates 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 due to its high 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 reported it had 1,515 customers exceeding the $100,000 level in annual recurring revenue, up 53% from a year earlier.
In vehicle telematics, Samsara competes with Verizon Communications (VZ), Trimble (TRMB), Solera Fleet Solutions (Omnitracs), Motive, and Orbcomm (ORBC). In IoT markets, Samsara competes with Johnson Controls (JCI), Motorola Solutions ' (MSI) Avigilon division, Honeywell (HON) 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.