While the term “Internet of Things” (IoT) may not sound very technical, it refers to a technological sector focused on interconnectivity between electronic devices and the data they generate. Examples of this include smart home appliances, like remote-controlled lighting, smart fridges and even devices like Amazon’s (NASDAQ:AMZN) Alexa. The purpose of devices like these is to create intelligent data networks that specialize in data collection and analytics for better device efficiency and usage.
That said, many investors and sectors, in general, have not yet seen the value in the networks, and despite early excitement, there are now many IoT stocks to sell before they correct even further. Whether or not the future trajectory for these stocks will improve is difficult to predict. However, investors may want to play it safe with more developed tech sectors before going all in on a still-unproven one like IoT.
Lantronix (LTRX)
A few months ago, I recommended Lantronix (NASDAQ:LTRX) as a buy. Unfortunately, since then the stock has lost over 30% of its value. I like many other analysts had mistakenly expected the stock’s strong Q1 2024 performance to carry it into the next wave of excitement. However, seemingly the opposite has happened. The stock is now trading at a significant discount as it searches for an opportunity to rebound.
For its business side, the company focuses on what it calls “Edge Artificial Intelligence.” This is a combination of technologies that support remote interconnected environments and collect data for analytical purposes. By building this functionality on the edge, LTRX enables faster response times without needing cloud networks.
Yet, all of this added capability has done little to propel the stock forward, as it now sits within 20% of its 52-week low. I would sell now if you still have a position in LTRX and wait for it to find a new floor for around $3.00 before buying back in.
Samsara (IOT)
Intended as a provider of device services for fleet-scale applications, Samsara (NASDAQ:IOT) has performed a little too well year-to-date. At a market cap of nearly $20 billion, Samsara is not a small company, though it is relatively new to the stock market, seeing as how it went public back in December of 2021.
Yet, its rise over the last three years has been nothing short of exceptional. With 60% gains since then, it’s time to start wondering whether or not Samsara is overvalued. For starters, the company has not been profitable for the last five quarters. Though it has seen generous revenue growth, it is difficult to understand why its operating costs are so high. The company’s employee count is relatively small for its market cap at just under 3,000 and many of its customers are immensely successful companies like DHL or XPO.
While it does state its commitment to continually re-investing in its operations, Samsara needs to turn a profit for its investors before it becomes one of the IoT stocks to sell.
Inseego (INSG)
Specialized in providing cloud-to-device services, Inseego (NASDAQ:INSG) has seen a bull run like no other. Up 36% in the last month and 370% year-to-date, the company has certainly made investors very happy so far. Yet, all of this growth comes despite a lack of profitability, meaning there’s very little beyond speculation driving its value.
While its business model certainly has potential, the company has not provided investors with any dividends or earnings beyond its increase in value. Thus, should the market show weakness, INSG would be among the IoT stocks to sell to pull cash out of a potentially overvalued position.
Ultimately, there’s a good chance INSG could grow even more in value, but it’s due for a generous correction first. Thus, investors may want to consider taking profits now and buying back in at a more sustainable price.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
