Satellite-based Internet of Things (or "IoT") datacomm services provider ORBCOMM Inc. (Orbcomm) (NASDAQ:ORBC)
has spent the time and money to establish a strong end-to-end
industrial IoT infrastructure, underpinned by a dedicated low-earth
orbit satellite network. Now it is time for the company to demonstrate
that it can sign up, and keep, enough customers in diverse fields like
trucking, marine shipping, intermodal, and heavy equipment to deliver on
the promise and potential of a high-margin, high-ROIC business model
that can have meaningful growth from widespread adoption of industrial
IoT.
This is no sure thing. The shares are down a
bit over the past year (and up about 50% over the past three years), and
recently reported revenue growth has been lackluster - particularly for
a company that many believe should be solidly in its "growth phase."
That said, the adoption and use of IoT to track mobile assets is still a
relatively novel (if not experimental) concept for many of Orbcomm's
customers and I wouldn't regard the relatively "missionary" aspect of
today's sales process as a permanent issue. What's more, with a strong
asset base now in place, I expect Orbcomm to start seeing the benefits
of early adopters realizing (and reporting on) the benefits of IoT-based
asset tracking and their peers moving to catch up.
If
Orbcomm is in fact in the early stages of its adoption curve, there is
significant uncertainty when it comes to modeling. I don't think 15x-17x
forward EBITDA is unreasonable for a company that should be able to
grow EBITDA faster than that over the next three, five, and 10 years;
but investors will likely not be patient with the name if hardware sales
don't start materializing in a bigger way in 2017.
Read more here:
With Assets In Place, Orbcomm Ready To Drive Wider M2M Penetration
