Analyst: IoT Demand Sets Up Adesto Technologies For Long-Term Growth

Semiconductor supplier Adesto Technologies Corp IOTS is well-positioned to benefit from the growth in demand for Internet of Things-related endpoints, according to Canaccord Genuity. 

The Analyst

Canaccord's T. Michael Walkley initiated coverage of Adesto Technologies with a Buy rating and $9 price target.

The Thesis

Adesto is best known for its non-volatile memory, or NVM, solutions for IoT endpoints and should benefit over the coming years given its differentiated offerings that include low power and long battery life solutions, Walkley said in the Monday initiation note. (See the analyst's track record here.) 

The company's new product lines including MavriqCM and EcoXip should help Adesto generate strong revenue growth and significant operating leverage, even if it only wins a modest market share from existing products, the analyst said. 

The bullish case for Adesto is also predicated on its recent acquisition of S3 Semiconductors and the pending purchase of Echelon, Walkley said. The addition of S3's products will expand Adesto's addressable market, he said. 

The potential Echelon acquisition would increase Adesto's addressable market from IoT ASICs to complete industrial IoT solutions, according to Canaccord. 

In light of favorable industrywide trends and benefits from acquisitions, Adesto's revenue growth over the coming years should outpace its expense growth, Walkley said. This should help lift the company's earnings per share from a loss of 15 cents to positive 54 cents in 2020, with a long-term earnings growth profile to follow, the analyst said. 

Price Action

Adesto shares were trading up 1.5 percent to $5.79 at the time of publication Monday. 

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