Why CalAmp (CAMP) might need to go the extra mile to cheer shareholders

CalAmp Corp. (NASDAQ: CAMP) is one of the few tech companies that continue to feel the pinch of the coronavirus crisis, unlike the broad sector that bounced back after the initial slump and thrived on the mass adoption of technology in the corporate world. Deferment of orders by small-to-medium-sized customers, which constitute most of CalAmp’s client-base, is the main challenge faced by the company.

Shares of CalAmp have been in recovery mode after slipping into a multi-year low early last year. After emerging from the single-digit territory recently, the stock is probably headed for a rebound, if the positive target price is any indication. Investors can bet on the growth the tech sector is currently witnessing — thanks to the virus-driven digital shift — and consider CAMP’s low valuations as a buying opportunity. That said, the deepening market uncertainty calls for caution.

Bright Spot

While the SME market remains a concern, with customers tightening their budget to save cash, the bright spot is stable orders from large clients like Caterpillar, Inc. (CAT) and the services segment that has stayed largely unaffected and partially offset the weakness in the telematics division.

The Irvine, California-based company, specialized in telematics systems and IoT software, is looking to hit the growth path with a strategy focused on partnerships and portfolio expansion. Last month it entered into a partnership with Coastr, a start-up that offers digital solutions to car rental firms, to create a digital ecosystem for customers. The deal followed a similar tie-up with European firm Grove & Dean earlier, to protect vehicles and save insurance premiums.

Looking Ahead

The COVID vaccine rollout should add to the confidence of CalAmp’s executives who have expressed optimism that the company would emerge stronger from the crisis. Factors that add to the bullish view are positive free cash flow and unfolding opportunities in the technology market. Also, the company continues to benefit from the ongoing 3G-to-4G upgrade cycle and stable demand for its fleet management solution.

We believe our SaaS sales will continue to expand as our customers increasingly value the knowledge and real-time status of their critical mobile assets and personnel, and this is the hallmark of our telematics technology. With continued execution on our strategic initiatives and further refinement of our business, we expect to drive higher-quality revenue to further expand our margins, as well as higher profitability and cash flow for the Company.

Jeff Gardner, chief executive officer of CalAmp

Mixed Performance

The firm’s financial performance was affected by the shutdown in the early part of the fiscal year, but the trend changed for the better in the early second half. Though revenues and adjusted earnings declined in the third quarter, they came in above analysts’ forecast. At $88 million, revenues were down 9% from last year, while the bottom-line dropped to $0.07 per share from $0.15 per share.

Read management/analysts’ comments on latest quarterly reports

The stock, which has long been languishing in the bear market territory, had a positive start to 2021 and crossed the $10-mark for the first time in almost one year. Currently hovering near the pre-pandemic levels, it traded higher early Thursday, after closing the previous session at $10.12. It underperformed the market and the tech sector most of 2020.