4 Reasonably-Priced Wearables Stocks to Strap On Today
The rise and fall of Fitbit (NYSE:FIT) and GoPro (NASDAQ:GPRO) has made many investors wary of wearables stocks. Indeed, when one takes more of a macro perspective, some of these names can look like no-moat companies who take a sensor and linking it to an app.
Moreover, with relatively few options in this market, finding stocks in this market at a reasonable buy price can become difficult. Although Samsung has increasingly embraced wearables, it does not currently trade on U.S. markets. The traditional watchmaker Fossil (NASDAQ:FOSL) has also made a foray into this market. However, FOSL’s price-to-earnings (P/E) ratio might deter investors. Nike (NYSE:NKE) exited this market in 2014 and has not returned.
However, despite the difficulties in monetizing this technology, I see a bright future for in the world of wearables stock, and a few equities stand out. Investors wanting to profit from this growing trend should look at these four wearables stocks.
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Reasonably-Priced Wearables Stocks to Strap On:
Source: Google
Alphabet (GOOGL, GOOG)
One way for a wearables stock to develop a moat is linking this technology to an ecosystem. The popularity of Android would seem to make Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) an obvious choice. Previously, however, Google’s wearables strategy lacked direction. Last year, the company even quietly removed Android Wear devices from the Google store.
But then last month, the company announced its Wear OS line of products. Wear OS can work with numerous watch devices produced by different companies. Rumors have also surfaced about an upcoming Google Pixel Watch as a flagship product.
Alphabet-subsidiary Verily is also developing smartwatch for medical applications. They are working on a version of this device that draws blood. While these blood-drawing devices are likely years away from a market release, it does place the company at the forefront of research in the wearables arena.
Advertising still accounts for the vast majority of company revenue. Hence, buying GOOGL for a wearables stock is comparable to investing in an ETF to own GOOGL. Still, the company’s innovations should draw people into GOOGL stock despite its $800-plus billion market cap. Wall Street forecasts growth of 23.2% this year and 21% the next. The stock also trades at a forward P/E of 24.5.
I realize prospective buyers of wearables stocks might want more of a pure play. However, given the company’s ownership of Android, its medical-related research, and its financials, wearables investors should not ignore GOOGL stock.
Reasonably-Priced Wearables Stocks to Strap On:
Source: Apple
Apple (AAPL)
Like Alphabet, Apple (NASDAQ:AAPL) also benefits from a large ecosystem. This ownership of iOS will serve the company well in the wearables market. Apple does not release official sales figures on the Apple Watch. However, one analyst believes that the company sold an estimated 3.5 million watches in the second quarter of this year.
The Apple Watch offers fitness monitoring and other health-related benefits. The latest version even offers a built-in altimeter that can measure a person’s climb up flights of stairs.
Apple’s watch also functions as an extension of the more popular iPhone. As such, wearables remain a relatively small part of Apple. Still, investors should benefit. As of the time of this writing, Apple remains the largest company in the world and the only one with a market cap exceeding $1 trillion. Despite its large size, analysts expect 27.7% profit growth this year and 15.4% next year. It also trades at a forward P/E of 16.5, much lower than that of other high-profile tech stocks.
Given the size of the company, wearables make up a relatively small part of AAPL stock. Still, with the Apple Watch selling millions of units and enhancing the breadth of the iOS ecosystem, AAPL is undoubtedly a wearables stock. Furthermore, the high profit growth and low valuation make AAPL stock compelling to investors. With the double-digit profit growth and its strength in Asia, wearables have become another pillar that will bolster AAPL stock.
Reasonably-Priced Wearables Stocks to Strap On:
Source: Shutterstock
Garmin (GRMN)
Garmin (NASDAQ:GRMN) has recently pivoted into one of the top wearables stocks. Late last decade, Garmin saw its GPS device sales fall off of a cliff as the adoption of the smartphone made many standalone GPS devices obsolete.
As a result, Garmin redefined itself. It specialized in GPS devices for niches such as marine and outdoors. And it also entered the wearables market. One of Garmin’s more interesting wearables applies GPS technology to tracks dogs and other pets. However, most people know Garmin products better for their human-related functions. It stands out particularly with its watches designed for multi-sport functionality. In addition to jogs, it can monitor activities as varied as sleep, weight loss, running, swimming, skiing, and paddle sports.
In addition to the GPS ecosystem and the variety of activities monitored, investors will also like GRMN stock for its financials. The stock trades at a forward PE of just over 20. It also expects to see 12.2% profit growth this year. Analysts predict that will slow into the single digits in future years.
Despite slowing growth, I see Garmin as a well-run company able to adapt to conditions that would have sunk other companies. Unlike Fitbit, it has maintained profitability and net income growth. Although its future probably lies in niches, these specialized areas in wearables and solid financials will give GRMN stock the ability to thrive against much larger rivals.
Reasonably-Priced Wearables Stocks to Strap On:
Source: Huami
Huami Corp (HMI)
Few Americans have heard of Huami (NYSE:HMI). However, it has become a leader in developing and selling wearable products within China. In fact, it sells more wearable devices than any other company in the world. According to its website, Huami shipped 11.6 million wearables in the first nine months of 2017. Many of Huami’s products sell under the Amazfit brand.
Most interesting to wearables stock investors, however, is Huami’s one partnership which could potentially bring its products to the entire world.
That partnership is Chinese electronics giant Xiaomi (OTCMKTS:XIACY). Xiaomi is China’s largest smartphone manufacturer and the 4th largest smartphone manufacturer globally. Like Huami, Xiaomi remains unfamiliar to most Americans. However, I think that could change for both investors and consumers.
Xiaomi had previously focused on its home market in China. However, it has expanded across Southeast Asia and eyes expansion plans in both India and South Africa. Like Google and Apple, Xiaomi produces its own tech ecosystem. This Xiaomi ecosystem gives Huami products the same kind of footing enjoyed by iOS or Android-based products outside of Asia.
Huami stock also appears appealing from an investor standpoint. Despite the large number of devices it makes, the market cap stands at around $570 million. Moreover, its expected profit of 91 cents per share this year gives the company a forward P/E of only 10.4. Wall Street expects profits to grow by 82% this year. Also, given its small size, low P/E, and importance to Xaiomi, I think this makes HMI a possible buyout candidate.
Either way, with Huami’s small size, its profit growth and the company’s position in the world’s fastest-growing markets, HMI stock will continue to become a more prominent wearables stock.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
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