Simply put, the Internet of Things (IoT) is where computers and other technological devices communicate with one another and exchange data over the Internet, independent of human beings.
In the future, self-driving cars will need to communicate with one another, as well as with traffic lights, pedestrian crossings, and other devices and networks to ensure that traffic proceeds smoothly and people don’t get hurt. In our homes of the future, smart appliances such as toasters, coffee makers and fridges will communicate with each other in the kitchen.
IoT also applies to webcams, printers, and wearable technology such as Apple Watches and Fitbits, not to mention routers and smart speakers such as Google Home. Essentially, IoT is the future and a select number of companies are spearheading the creation of these devices that we are now relying on more and more.
The global IoT market is expected to reach a value of $1.39 trillion by 2026, up from $761.4 billion in 2020 for a compound annual growth rate of 10.53%. As the IoT market explodes, we look at three IoT stocks to buy and hold for the next 10 years.
IoT Stocks To Buy and Hold for the Next 10 Years: Qualcomm (QCOM)
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San Diego, California-based Qualcomm’s stock has been on a tear lately, having risen 36% in the past month to $180 per share, off from its all-time high of $188.77.
The company, which makes semiconductors and software that powers wireless technology, especially for cell phones, has been going gangbusters lately after it issued bullish forward guidance and reassured investors that it can continue growing even as its relationship with Apple (NASDAQ:AAPL) winds down. Qualcomm supplies wireless connectivity chips for Apple’s devices but forecasts that it will only supply 20% of the chips needed for the 2023 iPhone.
The ending of the Apple relationship had Wall Street concerned, but Qualcomm recently said that it expects its entire chip business to grow at least 12% by 2024 even as its business with Apple slows to a “low single-digit” per cent of sales by the end of 2024. And Qualcomm sees much of its future business coming from IoT chips and low-power chips needed for smart appliances.
In all, the company forecasts that IoT chips will account for $9 billion of its total revenue by 2024, up from $5 billion this year. Qualcomm anticipates $27 billion in total chip sales in 2021. News that Qualcomm will be able to replace its business with Apple by ramping up its IoT chip production has powered QCOM stock higher.
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Few stocks have enjoyed as big a run this year as San Francisco-based Cloudflare. At $197.39 a share, NET stock is up 165% year-to-date, including a 7% gain in the last month.
Since going public in September 2019, the NET stock price has increased nearly 1,000%. The website security company that is expanding into IoT security solutions has enjoyed the impressive share price appreciation because of its incredible earnings growth. In its most recent quarter, Cloudflare reported 53% year-over-year revenue growth, a 77% gross margin, and that it had nearly 1,100 customers globally.
And Cloudflare has plenty of room to continue growing. Last year, the company pegged its addressable market at $72 billion, but now says that its market opportunity could reach $100 billion by 2024.
In terms of the Internet of Things, Cloudflare in 2017 introduced “Orbit,” a security product that is specifically designed for IoT devices. While Cloudflare continues to focus heavily on website security, it sees a burgeoning market for IoT security, especially given the potential to wreak havoc using internet-connected devices.
And despite some improvements in recent years, the security of IoT devices remains pretty bad, providing Cloudflare with plenty of future opportunities.
IoT Stocks To Buy and Hold for the Next 10 Years: Cisco Systems (CSCO)
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Shareholders of Cisco Systems got a scare recently when the San Jose, California-based company issued disappointing quarterly results and forward guidance. Cisco reported quarterly revenue of $12.90 billion versus $12.98 billion that was expected by analysts, and said that for the full year, it now expects $3.38 to $3.45 in adjusted earnings per share.
Analysts were looking for earnings of $3.42 per share. CSCO stock immediately plunged 8% on the news, but quickly recovered and is now up 6% over the past five trading sessions at $55.54 per share. Year-to-date, Cisco stock is up a healthy 26%.
Cisco, which manufactures networking hardware, software and telecommunications equipment makes the cellular technology needed to connect IoT devices and allow them to communicate with each other.
The company currently generates about $100 million a year from its IoT-related technologies and sees exponential growth potential. Cisco’s “Internet for the Future” category, which includes its IoT work as well as optical networking and 5G products, generated $1.37 billion in revenue in its most recent quarter, up 46% from a year earlier.
As demand for more connected devices grows, CSCO stock and its shareholders should benefit.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.