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Semtech Boosts Presence in Smart Meter Space With HWM Deal

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Semtech Corporation (SMTC - Free Report) recently announced that the company’s Low power, high Range (LoRa) devices and wireless radio frequency technology have been deployed by Hangzhou Water Meter Co. (HWM), Ltd. in its smart water meters solutions.

The technology enables public utility companies to improve efficiency and reduce management costs. It will allow users to communicate, effectively monitor data and provide alerts, thereby increasing efficiency.

HWM’s LoRa-based water metering solution is expected to be deployed in 72 residential districts in Hangzhou by the end of 2019, in turn expanding Semtech’s customer base.

The LoRa Technology enables long-range connectivity of Internet of Things (IoT) devices and aids in connecting sensors to the cloud. Its long range performance and low power consumption requirement enhance the overall performance of smart meters. Moreover, this technology helps in real-time communication of data and analytics to enhance efficiency as well as productivity.

Consequently, the move is likely to boost the adoption rate of the company’s LoRa technology in the smart water meter market, which in turn will drive the top line.

Market Opportunities to Aid Growth

This deal will strengthen Semtech’s presence in the smart water meter market on the back of increasing focus on reducing non-revenue water, retrofitting of aging water infrastructure and the need for accurate billing.

Per a report from MarketsandMarkets, the global smart water meter market is expected to witness a CAGR of 7.23% in the 2016-2021 period.

The latest deal will help Semtech to reap benefits from potential growth in the smart water meter market.

This will aid the company’s momentum, thereby strengthening LoRa-based solutions in this space.

Partnerships Play a Key Role

Semtech is witnessing growing strategic alliance and contracts, thanks to cost-efficient abilities of LoRa technology in creating and deploying IoT solutions.

Apart from the current deal, the company recently joined forces with Continental Automated Buildings Association (CABA) to enhance and innovate the latter’s portfolio of smart home and building technologies.

Additionally, per a deal between Ineo-Sense and Lauak Group, the former will provide LoRa-enabled asset tracking sensors that will be integrated into the latter’s manufacturing containers.

Further, it has been selected to be used in Brazil’s network, which is based on the LoRaWAN protocol, deployed by American Tower. Moreover, Lemonbeat has adopted LoRa technology to enhance smart metering solutions.

We believe Semtech is well poised to rapidly penetrate into the expanding IoT market, aided by the highly popular LoRa technology.

However, it continues to be affected by mounting competition in the semiconductor space, including sluggish demand in China. The resultant pricing pressure could dampen the company’s margins and profitability. Seasonality in the consumer segment remains a woe and might hamper its top line.

Zacks Rank & Stocks to Consider

Currently, Semtech carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include IAC/InterActiveCorp (IAC - Free Report) , Dropbox, Inc. (DBX - Free Report) and Alibaba Group Holding Limited (BABA - Free Report) . While both IAC/InterActiveCorp and Dropbox sport a Zacks Rank #1 (Strong Buy), Alibaba carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for IAC/InterActiveCorp, Dropbox and Alibaba is currently projected at 20.5%, 14.2% and 26.8%, respectively.

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