By:
Taylor Smith, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Gemalto (GTOMY) is the world’s largest supplier of enterprise
cybersecurity solutions and services. The company also provides identification
products and services and contributes to the IoT space.
• Gemalto seeks to add to
its Government and Enterprises segment through the acquisition of 3M’s Identity
Management business
• In a race against
Verizon, AT&T selected Gemalto to help jumpstart its internet of things
development franchise
• China mobile has sought
out Gemalto for supply of its ODC and eSIM solutions in order to jump ahead in
the autonomous car sphere
Key
points: Gemalto has been on the move over the past couple of
months with new partnerships and new acquisitions. In December, management
announced a new acquisition for 3M’s Identity Management business, adding to
Gemalto’s Government & Enterprise segment by providing end-to-end biometric
solutions catered to border control, law enforcement, and civil identification.
The acquisition is priced at $850 million (cash) and is expected to keep the
ball rolling on the company’s government segment and be roughly 11% accretive
to 2017 EBIT.
If you have watched or
read any business news in the past year, you would know the internet of things
is set to explode. Estimates have the number of connected devices reaching 50
billion by 2020. Companies around the world are racing to develop their IoT
services, especially telecommunications giants. In January, AT&T announced
that it chose Gemalto to help create its internet of things development
franchise. Gemalto’s GSMA-compliant ODC and eSIM solutions are primary aids for
global mobile operators that can fast-track device onboarding and reduce costs.
It’s no shock that many
giants are seeking to early get access to the internet of things market. The
market for driverless vehicles is expected to be worth over $130 billion across
the globe by 2021. In December, Gemalto reached an agreement with China Mobile
to supply ODC Subscription Management solutions and GSMA eSIMs to help prosper
and secure connectivity in cars. The new additions will provide passengers with
connected services including infotainment, navigation support, and vehicle
diagnostics.
What
has the stock done lately?
GTOMY has experienced an excellent
climb over the past couple of months, starting at $24.90 on December 2nd
and closing at $29.23 on January 31st. The company made a number of
announcements (some mentioned in this article), that have demonstrated strong
potential for future business in a number of its segments.
Past
Year Performance: Volatile would be the most appropriate
word to describe the stock trend for GTOMY over the course of the past year.
One of the most recent price drops was in October when the company missed
earnings. Gemalto experienced a price decrease of 12.6% in three days. Outside
of this, GTOMY has reached a high of $37.29 in March and a low of $24.90 in
early December.
Source: FactSet
My
Takeaway
The volatile year is not
indicative of the company’s future performance. Gemalto represents a company
that has successfully pivoted over time. What we are seeing today is
advancements in the company’s lesser segments: Machine-to-Machine and
Government & Enterprise. These segments are positioned in industries that
have extremely high and immediate growth potential. I believe that new
additions of partners coupled with the plethora of pre-existent reliable
clients will help the stock to continue moving in a healthy direction.
