hares have fallen over 40% since December 2014 on FX fears, even as Sierra's bus

iness has failed to show a meaningful hit from FX issues.

Despite EBITDA and EPS growth that is far higher than its peer group, shares of
Sierra trade at no discernible premium to the group.
Management has a good track record of strategic and accretive M&A, and we expect
this to continue.
As investments made to secure its leading position in the Internet of Things mar
ket pay off, the margin gap between Sierra and its peers is quickly closing.
Clean, debt-free balance sheet leaves room for further M&A.
As the world becomes ever more connected, smartphones and tablets are not the on
ly devices that are powering this transformation. Appliances, meters, and a myri
ad of other electronics are being connected to the ever-growing "Internet of Thi
ngs," which has the potential to be just as transformational as the growth of sm
artphones and tablets. And while many companies will profit from the growth of t
his market, few are as highly leveraged to it as Sierra Wireless (NASDAQ:SWIR).
Sierra, founded in 1993 in Vancouver, is a leading provider of networking and co
nnectivity solutions in a number of various countries. Officially, Sierra bills
itself as a provider of machine-to-machine (or M2M) connectivity solutions, but
the market that the company competes in is more commonly known as the "Internet
of Things," in which a myriad of electronic objects are connected to each other,
ranging from appliances to meters to automobiles. Many industry observers see t
his as a critical growth engine for the technology sector, and this is becoming
apparent not only in the statistics surrounding the Internet of Things, but in S
ierra's own financial results. However, Sierra's current stock price does not, i
n our view, reflect the company's growth potential and market position; shares c
urrently trade for under $30, down over 40% from their December 2014 highs of ov
er $49, as Sierra became engulfed in a tech-sector currency-induced selloff. How
ever, as management has attested, Sierra's foreign currency exposure is nowhere
near as material as the company's selloff suggests, and we believe that now is a
n opportune time to begin initiating a position in the company. Furthermore, whi
le shares of Sierra do trade at a slight premium to peers, the company's growth
is far higher, owing to its pure-play nature; while all of its peers compete in
the Internet of Things to some degree, Sierra has, in our view, the highest degr
ee of exposure to this phenomenon, and when examining the company's forward grow
th rates, this becomes clear. With forward EBITDA growth over the next two years
set to be almost twice as high as its peers, and EPS growth set to be over thre
e times higher, we see shares of Sierra as undervalued at current levels, and be
lieve upside of almost 50% is possible as the company continues to grow sales an
d profits, and as more investors come to see the potential of the Internet of Th
ings, and Sierra's place in this rapidly growing market. Unless otherwise noted,
financial statistics and managerial commentary will be sourced from the followi
ng:
Sierra Wireless'
Sierra Wireless'
Sierra Wireless'
Sierra Wireless'
Sierra Wireless'
Other historical
Company & Market

Q1 2015 earnings release

Q1 2015 earnings call
2014 financial statements
2014 annual report
latest investor presentation
financial filings
Overview

Sierra Wireless was founded in 1993 in Vancouver (though based in Canada, Sierra
reports results in the U.S. dollar), and the company went public in May 2000, w
ith shares quickly jumping to nearly $80 per share, only to fall below $2 by Sep
tember 2002 as the dot-com bubble burst.
However, Sierra's business continued to grow in the years since, and the company
set records in 2014 on a number of metrics, including sales, EBITDA, and EPS, w
hen adjusting for the divestiture of the company's AirCard mobile broadband unit
, which was shed in 2013 (for $100 million) to allow the company to focus its en

ergies on the M2M market, which we will refer to as the IoT (Internet of Things)
for the sake of simplicity.
At its core, the IoT is about global connectivity at a level that far surpasses
the tablet and smartphone markets, which absorb the bulk of news coverage about
the continued increase in global network connectivity. According to estimates by
Business Insider, by 2017, the IoT will reach a total of 9 billion devices, thu
s surpassing the global smartphone, PC, and tablet market. And estimates from Ci
sco (NASDAQ:CSCO) suggest that only 0.06% (6 basis points) of the things that co
uld be connected to the Internet in theory are in fact connected today, leaving
an enormous opportunity for growth in the years to come. IDC estimates that the
global IoT market will grow to $7.1 trillion in 2020, up from $1.9 trillion in 2
013 as the number of connected devices continues to grow. And even conservative
estimates from Gartner estimate that by 2020, 26 billion devices will be connect
ed in the IoT; naturally, estimates from Cisco and Intel (NASDAQ:INTC) are far h
igher; at 50 billion and 200 billion devices, respectively (this is