Could the Global X Internet of Things ETF see 26% CAGR?

An industry report forecasts 26% CAGR for the Internet of Things market until 2030, while the Global X Internet of Things ETF has gained 11% in the year to date. Driving the fund’s performance have been gains for stocks such as chipmaker Rambus.

- The Global X Internet of Things ETF is up 11% year-to-date.

- The fund’s ninth-largest holding Rambus is a favourite among institutional investors.

- IoT market estimated to grow to $3.4trn by 2030.

The Global X Internet of Things ETF [SNSR] share price has gained 11.4% year-to-date and 2.3% over the past month.

Over both time periods it has underperformed the technology sector more broadly, with the tech-heavy Nasdaq Composite gaining 14.9% and 8%, respectively.

SNSR saw a sell-off from several funds during the fourth quarter (Q4) of 2022, including PNC Financial Group [PNC] which sold 87,829 shares, Bank of America [BAC] which sold 11,880 shares, and Clearwater Capital, which sold 2,098 shares in the fund.

The fund’s ninth-largest holding, chipmaker Rambus [RMBS], has been a high performer for the Global X Internet of Things ETF, gaining 39.5% year-to-date and 21.1% over the past month. As of 10 April, Rambus has a 3.38% weighting in SNSR.

The fund’s fifth-largest holding, Dexcom [DXCM], has been a relative drag on SNSR’s performance, however. The medical device manufacturer is down 0.6% year-to-date and up 1.7% over the past month.

Which way will Dexcom shares break?

Dexcom, which manufactures continuous glucose monitors (CGMs), has been rolling out a global launch of G7, its latest monitor model, over Q1 2023. Despite avoiding the supply chain issues that have dogged competitors, Dexcom CEO Kevin Sayer highlighted the “chaos of success” during an interview with Fierce Medtech in January.

Dexcom’s shares jumped 19.4% on 28 October the day after the company reported an impressive set of Q3 earnings, but the stock entered a downward trend between that date and the end of January, until Q4 results sent the stock up 9.9% on 10 February.

The company is due to report Q1 2023 earnings on 27 April.

Investors in long-term disruption will be encouraged by the news that Dexcom’s joint venture with Tandem Diabetes Care [TNDM], to create an artificial pancreas based on Dexcom’s CGMs and Tandem’s insulin pump, has shown positive results in toddlers, which could prompt regulators to extend recommendation to the age group.

Rambus posts robust gains despite revenue miss

Rambus creates chips and hardware for a variety of high-tech industries, including Internet of Things (IoT). In early March, Rambus acquired CryptoCell and CryptoIsland Root of Trust technology from Arm and added them to its own intellectual property portfolio.

Since October, Rambus has been attracting the attention of institutional investors, with BlackRock [BLK] buying 449,088 shares at an estimated average price of $14.56 in Q4 2022.

The stock took a brief dip in February following a somewhat disappointing set of Q4 results. Adjusted earnings of $0.47 per share beat Refinitiv analyst expectations by 4.4%, but revenue of $122.4m missed estimates by 24.1%. Despite falling 1.5% on the day Rambus posted results, the stock regained lost ground the following day and is up 15.9% since then.

Six analysts polled by Refinitiv yielded a median price target of $55.00 for Rambus, implying 13.2% of potential gains over the coming year. Seven analysts offering ratings on the stock yielded one ‘buy’, five ‘outperform’ and one ‘hold’ rating.

Industry experts see the IoT market expanding at pace over the coming seven years. A recent report from Fortune Business Insights forecasts the industry to grow at a CAGR of 26.1% between 2023 and 2030, to reach an eventual $3.35trn.