Automation is being sold to us as a panacea.
Removing irrational human impulses is supposed to make planes, trains, automobiles and other machines safer.
Last week, a cutting-edge Boeing 737 Max jetliner plunged from the sky, killing all 157 passengers and crew aboard Ethiopian Airlines Flight 302.
It was the second such crash in four months, grounding the aircraft all around the world and raising speculation the problem is software-related.
Automation-software stocks have been grounded along with the Boeing jet. It’s an opportunity rare for investors.
The Max is an aerospace engineering oddity.
The fourth-generation 737 seats up to 230 passengers, a 27% bump over the classic.
Unfortunately, the rejiggered avionics brought an unintended consequence.
The nose of Max aircraft often lifts unexpectedly during high angles of attack and steep turns. Both are maneuvers common to takeoffs. In the worst case, this position could cause stalling.
To compensate, Boeing engineers implemented the Maneuvering Characteristics Augmentation System.
MCAS is a set of anti-stall software protocols that automatically lift the tail flags and push the nose lower.
Last October, 189 passengers were killed in Indonesia when a Lion Air jet crashed minutes into the flight. It was the first time a Max aircraft failed. Preliminary findings suggest a faulty sensor coupled with MCAS may be responsible.
Similarities to the Ethiopian Airlines crash are alarming.
The captain of Flight 302 reported a flight control problem just after takeoff, The New York Times reported. And air traffic controllers noticed the aircraft was flying erratically, gaining and losing hundreds of feet in altitude.
The response from Boeing has been brisk. The company promised a software fix within 10 days, and full cooperation with all ongoing investigations.
The Max, with its unapparelled fuel efficiency, has become a symbol for technological innovation. It’s also an industry workhorse. The aircraft is in use at 69 airlines around the world. Backorders now exceed 5,000 units.
More important, the relative low failure rate of this jetliner is responsible for a groundswell of consumer confidence.
We take for granted commercial aircraft are safe. We assume they can fly, and even land, using automation.
It’s a transformation that is playing out in high-speed trains and automobiles, too.
- DAF, a unit of PACCAR (PCAR), demonstrated autonomous truck technology in 2016.
- Elon Musk, the chief executive of Tesla (TSLA), promises a fully self-driving car by the end of 2020.
One way or another, automation is coming to all the transportation sector, soon.
The Ethiopian Airlines tragedy is a setback. But it will not change the trend.
PTC Inc. (PTC) offers a comprehensive way to invest in automation. Its industrial innovation platform has been embraced across every sector. From aerospace and automotive, to oil and gas, and retail, leading companies use PTC software to automate processes and maximize competitiveness.
The Boston company boasts 800 partners and a developer ecosystem 550,000 strong. They are all focused on one really big idea: Networks of connected things should provide total awareness. PTC software makes those connections seamless.
ThingWorx, its Internet of Things platform, allows companies to quickly build, connect and analyze networks of sensors, machines and software protocols. According IT research firms Gartner, IDC and many others, ThingWorx is best-in-class.
Bain & Co., a global management consulting firm, predicted in 2018 that the combined market for IoT software, hardware, systems integration, and data services will grow to $520 billion by 2021, more than double the 2017 spend.
In an era of sensors, data and super complex machines like the Boeing 737 Max, that kind of growth makes good sense. Software that binds everything together is more important than ever.
PTC shares trade at 56x forward earnings, for a total market capitalization of $10.8 billion. That is only a fraction of top rivals such as Adobe Inc. (ADBE) at $125.7 billion, and Autodesk (ADSK) at $33.6 billion, respectively.
The stock completed a four-month consolidation between $77 and $90. It is down from a record high of $107.50 last October. The current weakness is an opportunity. PTC is a leader in a huge new market for software services. Shares should double over the next three years.
Long-term oriented investors should consider owning the stock ahead of that growth.
Jon D. Markman