Smart home stocks offer tremendous long-term upside.
The “internet of things,” or IoT, describes the growing number of physical objects, devices, appliances and machines that are connected to the internet via sensors and software. The IoT is already changing people’s everyday lives inside their homes, with the advent of products like smart speakers and doorbells. Bank of America recently found that 72% of survey respondents own at least one connected device in their home, up from 43% in 2019. Smart home additions and upgrades have played a big role in the booming housing and home improvement markets. Here are nine IoT stocks to buy to bet on the smart home trend, according to Bank of America.
Amazon.com Inc. (ticker: AMZN)
Bank of America says Amazon is king of smart home device retailing. In fact, 23% of survey respondents said they would prefer to buy a connected home device from Amazon, a higher percentage than for any other retailer. Analyst Justin Post says Amazon’s smart home dominance is driven by a number of factors, such as its Prime membership program, low prices, convenient shipping options, a wide range of available products, the integration of Echo smart home hubs and its acquisition of smart doorbell company Ring. Bank of America has a “buy” rating and a $4,250 price target for AMZN stock, which closed at $3,523.16 on Dec. 8.
Best Buy Co. Inc. (BBY)
Best Buy is the first retailer that 16% of survey respondents would choose to buy a connected home device from. Analyst Elizabeth Suzuki says the company’s advantages include its customer service, its focus on the smart home category and its vendor-supported product offerings. Suzuki says Best Buy’s smart home market share may expand further as the complexity of connected home devices increases, requiring more advanced installation and servicing. Suzuki says Best Buy has transformed into one of the most consistent and highest-quality modern retailers. A Bank of America survey found that 16% of respondents would prefer to buy a connected home device at Best Buy.
Walmart Inc. (WMT)
Walmart is another top smart home shopping destination. Bank of America found that 12% of shoppers would prefer to buy a connected device at Walmart, including 41% of shoppers between the ages of 18 and 29. Analyst Robert Ohmes says Walmart’s omnichannel capabilities will likely continue to help it gain market share from less tech-savvy brick-and-mortar competitors in home-related categories. Walmart’s core brick-and-mortar business remains solid, and it is gaining market share in the grocery category. Walmart has also made tremendous strides in online sales, delivery and pickup. Bank of America has a “buy” rating and a $190 price target for WMT stock, which closed at $137.15 on Dec. 8.
Home Depot Inc. (HD)
Home Depot is the market share leader in large home appliance sales. The smart home survey suggests that its share is expanding, given that 23% of respondents report purchasing a large home appliance from Home Depot in the past three years, up from just 15% a year ago. Suzuki says much of those market share gains come from Sears and other smaller retailers. These retailers outside the top five account for just 12% of large appliance sales, down from 30% in last year’s survey. Bank of America has a “buy” rating and a $440 price target for HD stock, which closed at $411.25 on Dec. 8.
Lowe’s Cos. Inc. (LOW)
Lowe’s 21% large appliance market share came in just short of Home Depot’s 23% share in the smart home survey. Like Home Depot, Lowe’s share increased from 15% a year ago. Suzuki says the market share shift is no coincidence given the relatively advantageous positioning of the largest retailers over the past two years. Not only were they allowed to stay open as “essential businesses” during the economic shutdowns in 2020, but they are now benefiting from more robust and diverse supply chains. Bank of America has a “buy” rating and a $292 price target for LOW stock, which closed at $256.74 on Dec. 8.
Target Corp. (TGT)
Target captured 11% of the implied smart home market share in the survey, but Bank of America found that Target was highly preferred by shoppers ages 18 to 29, with a 43% share. Ohmes says Target likely had a strong Black Friday performance this year given elevated traffic levels, enhanced same-day offerings and extended holiday promotions. Ohmes says traffic was highest in toys, electronics and apparel. Target also added 18,000 drive-up parking spots and expanded its product assortments for its subsidiary Shipt ahead of the critical holiday shopping season. Bank of America has a “buy” rating and a $329 price target for TGT stock, which closed at $239.72 on Dec. 8.
Costco Wholesale Corp. (COST)
Costco captures 8% of the smart home market share, according to Bank of America. Ohmes says Costco also demonstrated strong traffic trends and stock levels during Black Friday. He said traffic in apparel, grocery and electronics was particularly impressive, and high gas prices will likely continue to boost Costco traffic throughout the holiday season. Costco recently reported 14.1% same-store sales growth in November, including 11.7% e-commerce sales growth. The sales numbers slightly missed analyst estimates but still equate to healthy holiday growth. Bank of America has a “buy” rating and a $555 price target for COST stock, which closed at $530.11 on Dec. 8.
Alphabet is a market leader in online advertising and search. The company also markets Google Home, a line of smart speakers integrated with Google and third-party services, including voice-controlled home automation. Post says younger shoppers in particular enjoy automated speakers, lighting, thermostats and camera systems. Almost 60% of survey respondents own smart speakers, and Google Home’s 34% market share was second only to Amazon Echo. Only 14% of smart speaker owners use the devices for home automation, creating future growth opportunities for Alphabet. Bank of America has a “buy” rating and a $3,210 price target for GOOGL stock, which closed at $2,963.73 on Dec. 8.
Sonos Inc. (SONO)
Smart speakers are only a small part of the overall businesses of Amazon and Alphabet, but Sonos is more of a pure play on smart home devices. Analyst John Babcock says smart speakers are a gateway to more connected home devices, and Sonos is a great way for investors to gain exposure to smart home entertainment. Sonos has a 6% share of the smart speaker market, but Babcock says the company is well managed, has a solid balance sheet and has navigated supply chain disruptions well. Bank of America has a “buy” rating and a $47 price target for SONO stock, which closed at $31.42 on Dec. 8.
IoT stocks to buy:
— Amazon.com Inc. (AMZN)
— Best Buy Co. Inc. (BBY)
— Walmart Inc. (WMT)
— Home Depot Inc. (HD)
— Lowe’s Cos. Inc. (LOW)
— Target Corp. (TGT)
— Costco Wholesale Corp. (COST)
— Alphabet Inc. (GOOG, GOOGL)
— Sonos Inc. (SONO)
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9 ‘Internet of Things’ Stocks to Buy originally appeared on usnews.com
