We came across a bullish thesis on PowerFleet, Inc. (AIOT) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on AIOT. PowerFleet, Inc. (AIOT)’s share was trading at $6.92 as of Feb 27th. AIOT’s forward P/E was 51.28 according to Yahoo Finance.
A busy truckload depot, with trucks and goods packed up for their journeys.
AIOT is a logistics software and telematics company that provides critical solutions for managing fuel levels, maintenance schedules, security monitoring, and overall resource optimization for logistics businesses. As autonomous vehicles, including delivery trucks, forklifts, and automobiles, integrate with the Internet of Things and artificial intelligence, AIOT is positioning itself as a key player in this evolving industry. The company’s recent rebranding from PowerFleet (PWFL) to AIOT on July 1, 2024, signals its intent to capitalize on AI-driven advancements in telematics. While some may view this as a strategic move to benefit from AI-related market enthusiasm, the long-term question remains whether AI will drive sustainable value creation or merely inflate valuation multiples.
Beyond the rebranding, AIOT has undergone significant structural changes, including a fiscal year adjustment three quarters ago, which will make next quarter’s earnings the first to include a full twelve months under the new accounting system. This could serve as a catalyst for renewed investor interest. AIOT has also pursued an aggressive roll-up strategy, acquiring MiX Telematics at the end of 2023 and Fleet Complete in 2024, along with three other companies since its public debut in 2009. While roll-ups can drive growth, they also complicate the distinction between organic and inorganic expansion. Despite a revenue compound annual growth rate (CAGR) of 20% since 2009, AIOT’s revenue per share has declined at a -1.5% annual rate over the past twelve years due to dilution from acquisitions. Parsing the numbers suggests AIOT’s organic growth rate sits around 5% to 7%, raising concerns about whether it can achieve sustainable growth without continued dilution.
The lack of meaningful insider buying is another red flag, but passive investment trends may help counterbalance valuation concerns. Larger companies often command higher multiples, and if AIOT successfully scales through acquisitions and organic growth, its multiple could expand accordingly. The telematics market is poised for explosive growth, with some estimates suggesting a threefold increase by 2030. Comparable players like Samsara (IOT) trade at a 23.4x price-to-sales multiple despite ongoing GAAP net income losses, highlighting the valuation disparity between AIOT and its peers. If AIOT’s post-merger revenue reaches $400 million annually, even a conservative valuation at one-fourth of Samsara’s multiple would imply a $2.34 billion market capitalization—far above its current valuation.
Additionally, AIOT has promising cross-selling opportunities, as demonstrated by its relationship with a large North American rental company. Active Revenue Per User (ARPU) has climbed from $7 to $22 due to expanded offerings and deeper value-chain integration. This is just one customer among 8,000 enterprise clients and 40,000 mid-market businesses. Insurance companies are also showing increasing interest in AIOT’s solutions, as actively monitored truck fleets present lower underwriting risks.
Unlike network-effect businesses like Uber, where scale creates a near-monopoly advantage, telematics companies operate in a more fragmented, competitive landscape. The industry’s past was shaped by venture-backed firms spending aggressively to dominate market share, but AIOT is now competing in an era where capital is more disciplined, and smaller tech firms are being re-evaluated by investors. While Samsara is focused on developed markets, AIOT has established a foothold in regions like South Africa, Mexico, and Brazil, providing a potential competitive edge in less saturated geographies. As the telematics sector expands, AIOT’s current 1.25x price-to-sales multiple is unlikely to persist.
With only one quarter of results reflecting its most recent acquisition, AIOT has an inorganic catalyst for revenue growth over the next three quarters as pre-merger figures are replaced with consolidated results. While management’s claims about organic growth potential should be met with skepticism given past trends, the possibility remains that the recent merger was transformative or that secular market growth will provide sufficient tailwinds. If AIOT trades at just one-fourth of Samsara’s valuation, the upside is significant. AIOT has the potential to reach $17.33 by 2027, offering an attractive risk-reward profile in an increasingly tech-driven logistics landscape.
PowerFleet, Inc. (AIOT) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held AIOT at the end of the third quarter which was 16 in the previous quarter. While we acknowledge the risk and potential of AIOT as an investment, our conviction lies in the belief that some 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 AIOT 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 was originally published at Insider Monkey.