Orbcomm: A small-cap IoT stock that has doubled over the past 12 months

Even though Internet of Things (IoT) is a favorite theme among investors, the breadth of its applications is often lost to them. Outside the realm of home appliances and smart gadgets, there are numerous firms that leverage IoT to offer innovative solutions for a wide range of applications. Orbcomm Inc. (NASDAQ: ORBC) stands out on the list, thanks to its enviable clientele and the industry it caters to.

The Rochelle Park, New Jersey-based company uses its satellite communication networks to offer companies technologies that enable them to monitor and control their remote or moving assets including trucks and vessels. The company caters to a wide range of industries including surface transportation, shipping, heavy equipment, oil and gas, as well as government logistics.

Focus on growth

With the transportation industry gradually picking up this year and pent-up logistics demand on the plate, Orbcomm is looking at an optimistic year ahead. Earlier this week, the company reported stronger-than-expected results in the face of the pandemic-driven slowdown.

In an interview with AlphaStreet, Orbcomm CEO Marc Eisenberg said driving organic growth is the priority at the moment. “We’ve put a large amount of capital and effort into new products and services that should start showing results in the back half of 2021. From an M&A perspective, we have the strategic assets we need. With the integration predominantly in the rearview mirror, we need to focus on organic growth,” Eisenberg said.

In Q4, the company added multiple clients including vessel database provider Marine Traffic and logistics company Armellini Express, in addition to extending its contract with long-time partner and satellite telecommunications firm Inmarsat.  Apart from this, Orbcomm also serves a slew of popular names including CostCo, JBHunt,  Schlumberger, Caterpillar, and IBM.

New product launches

The management is highly optimistic as it enters the new financial year.  The company is currently expecting to launch a set of new products in the upcoming quarters, including a video solution for the In-Cab market, aimed at improving driver safety. Q1 will also provide more clarity on the customer demand for its new dual-mode telematics devices that were launched late last year.

The onset of the 5G era, meanwhile, should act as a tailwind to Orbcomm’s client acquisition efforts. “5G represents a great opportunity for customers to get enhanced solutions.  That can show in terms of more real time-data, leading all the way up to video,” the CEO pointed out.

Through the launch of these new products and the addition of new channels to the market, the management expects to achieve its long-term target of organic revenue growth of 10% with adjusted EBITDA growth of 20%.

For more insights on Orbcomm, read the latest earnings call transcript

Vaccine logistics impact

While the increased logistical requirements related to COVID-19 vaccination are also likely to provide some fillip to the recovering transportation business this year, the executive underplayed it, stating that it is hard to quantify the impact. “Our refrigerated transportation business is extremely strong.  We know these couriers are transporting vaccines but it is hard to quantify the direct financial impact.”

As on February 26, ORBC shares were trading at less than $8 per share. The stock has more than doubled in the trailing 12 months and carries an average annual price target that is at a 40% upside from the current trading price.  

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