Adesto Technologies Corp (NASDAQ:IOTS) has a key competitive advantage due to its high-quality, low-energy solutions, according to B Riley FBR. 

The Analyst

Analyst Josh Nichols initiated coverage of Adesto with a Buy rating and $10 price target.

The Thesis

The company has healthy margins due to revenue growth that's predicated on the ability to secure fixed-price design wins with OEMs and ODMs that convert into large-scale production, the analyst said.

The 90-percent CAGR in design wins since 2013 and production ramps led to nearly 30-percent year-over-year revenue growth in 2017, Nichols said.

B Riley FBR expects the growth trend to continue, given Adesto's "robust pipeline and growing end-market demand."

Adesto is able to retain customers once it secures a design win, due to the customized features and high switching costs, the analyst said.

The memory provider "crossed a major inflection point" when its pro forma EPS turned profitable in the third quarter of 2017, Nichols said. 

"As such, we believe IOTS shares offer investors an opportunity to buy a growing company with strong IP that is solving major challenges faced by the growing IoT market." 

Adesto shares trade at an unwarranted discount to the peer group median in light of the company's unique platform, recent growth trajectory and transition to profitability, according to B Riley FBR. 

The Price Action

Adesto's shares are up about 64 percent over the past year.

The stock was rising 8.7 percent at the time of publication Tuesday. 

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