We recently compiled a list of the 10 Best Internet of Things (IoT) Stocks to Buy. In this article, we are going to take a look at where DexCom, Inc. (NASDAQ:DXCM) stands against the other IoT stocks.
The Internet of Things (IoT) is a vast network connecting physical objects to the internet. Industries are embracing IoT technologies for applications like smart manufacturing and supply chain management. Enterprise IoT spending is expected to slow down in the second half of this year due to economic concerns which will affect corporate spending in general. However, corporate spending on IoT will rebound in 2025. The global market for IoT is expected to grow at a rate of 24.3% annually between 2024 and 2032. In 2032, it is expected to reach a value of $4,062.34 billion.
The rise of smart homes, buildings, and manufacturing, along with advancements in smart infrastructure, is driving significant growth in the IoT market. Moreover, smart city initiatives are becoming increasingly prevalent due to the growing population and expansion of cities. Consumers are adopting smart city solutions, including smart utility meters, transportation, waste management, grids, and air quality controllers.
IoT adoption is also growing rapidly in other sectors, particularly healthcare. The global IoT in healthcare market is projected to expand significantly and reach $952.3 billion by 2032, growing at a compound annual growth rate (CAGR) of 18%. IoT is a major force behind healthcare’s digital transformation, revolutionizing the way medical data is collected, analyzed, and used. This is leading to better patient care, greater operational efficiencies, and innovative treatments.
IoT is also seeing increased adoption in warehouse management. The global IoT warehouse management market is projected to grow from $14.8 billion in 2023 to $57.2 billion by 2033, reflecting a CAGR of 14.5% over the next decade. This growth is driven by the need for better inventory management, increased automation, and improved operational efficiency in logistics and supply chain operations.
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In terms of market segmentation by technologies, WiFi, Bluetooth, and cellular IoT make up 80% of the global IoT market. Wi-Fi accounts for 31% of all IoT connections. On the other hand, Bluetooth is used by 25% of connected IoT devices, and cellular IoT, including 2G, 3G, 4G, 5G, LTE-M, and NB-IoT, accounts for nearly 21% of global IoT connections.
A key trend in the IoT market for 2024 is the integration of AI technologies, including generative AI and edge AI, into IoT devices. Edge AI, in particular, is transforming the IoT landscape. By allowing IoT devices to process and store data locally, edge AI reduces lag and allows real-time responses. Incorporating AI into IoT devices within industries offers numerous benefits, including improved operational efficiency, safety, and decision-making. It plays an important role in predictive maintenance and supply chain management.
The future of IoT looks promising. Businesses and investors can expect significant returns as the technology continues to evolve. Keeping this context in mind, let’s take a look at the best IoT stocks to buy now.
Our Methodology
To create our list of the 10 best IoT stocks to buy, we focused on companies that offer IoT solutions or products, including firms involved in manufacturing IoT devices and hardware. The companies have been shortlisted based on hedge fund sentiment, sourced from our database of over 900 hedge funds. The best IoT stocks have been ranked in ascending order of the number of hedge funds holding a stake in them as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A doctor demonstrating how to use the medical device to a patient with diabetes.
DexCom, Inc. (NASDAQ:DXCM)
Number of Hedge Fund Holders: 69
DexCom, Inc. (NASDAQ:DXCM), a medical device company, is particularly well-known for its continuous glucose monitoring (CGM) systems for people with diabetes. The company offers a range of products, including the Dexcom G6 and G7, Dexcom Share, and Dexcom ONE, which aim to replace traditional finger-pricking blood sugar testing. The company’s continuous glucose monitoring products have allowed it to be a part of the fast-paced IoT market.
DexCom Inc. (NASDAQ:DXCM)’s management is confident in the CGM market’s growth potential, believing CGMs will become the standard for diabetes treatment. In Q2 2024, DexCom, Inc. (NASDAQ:DXCM) reported an operating margin of 19.5%, reflecting an increase of over 130 bps since Q2 2023. Meanwhile, the company’s free cash flow rose by over 70% compared to the first half of 2023.
DexCom, Inc. (NASDAQ:DXCM) has also consistently beat EPS estimates in the last 4 quarters. The stock has received an average “Strong Buy” rating from analysts, making it one of the best IoT stocks to buy now.
Here’s what Artisan Partners said about DexCom, Inc. (NASDAQ:DXCM) in its Q2 2024 investor letter:
“Dexcom detracted from performance in the quarter as the stock price gave back all the strong gains from the first quarter of this year. The company reported strong first quarter earnings, beating consensus estimates for the top and bottom lines, highlighted by 25% organic revenue growth. Additionally, it raised the low end of full-year revenue guidance based on the strong start to the year, with record new patient starts. Dexcom is launching an over-the-counter continuous glucose monitoring device set to target the over 25 million Type 2 diabetes patients who are not dependent on insulin. Furthermore, the medical device company recently expanded its salesforce to better address the ~200K primary care physicians in the United States. We see several catalysts going forward, and the stock is trading at a discount to historical valuation metrics.”
Overall DXCM ranks 8th on our list of the best IoT stocks to buy. While we acknowledge the potential of DXCM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DXCM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.