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CalAmp: Downgrading Due To Uncertainty Overload

May 07, 2020 9:55 AM ETCalAmp Corp. (CAMP)1 Comment


  • CalAmp's fiscal 4Q20 results were not terrible, but investors' interest in the stock slowly fazed after an initial bullish reaction.
  • The secular pressures on the telematics business were magnified by the COVID-19 crisis, and margins headed in the wrong direction.
  • I stay away from the stock until CalAmp has better visibility into its future operational and financial performance.
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CalAmp (NASDAQ:CAMP), one of my rare (and, in this case, unsuccessful) "very bullish" calls of the past few months, has been a disappointment. This is not to say that the company has been performing poorly. But its stock certainly has.

Shares ended the May 6 trading session up only 62 bps, after failing to hang on to more substantial post-earnings gains that reached 6.7% at one point. The top-line beat that also exceeded the high end of management's revised guidance did not seem enough to excite investors, at least not for very long. Now, CAMP sits 40% below the February peak and a whopping 70% lower than late 2018 levels.

Credit: Warrior Trading News

A look at fourth quarter results

CalAmp's $87.2 million in revenues, representing a 3% YOY increase, cannot be considered disastrous at all, especially considering the disruptions to the whole economy caused by the current health and economic crisis. Better yet, the transition from telematics to SaaS, the key pillar of any bullish case on CAMP, gained significant ground. The 60/40 revenue split is now consistent with the company's long-term target - see chart below.

The favorable revenue mix shift towards subscription services has, embedded within it, a couple of less bullish factors. First, SaaS revenues benefited more from the recent acquisitions in LoJack international than from organic growth. Second, soft demand for MRM and COVID-19-related supply chain challenges dented the performance of an already weak telematics segment.

Source: DM Martins Research, using company reports

Further down the P&L, I was once again disappointed to see gross margin dip by about two percentage points. It looks like temporary headwinds caused by the closure of the US manufacturing facility remains a factor.

As SaaS gains scale and becomes a more relevant segment, it would have been encouraging to see

ChartData by YCharts

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This article was written by

DM Martins Research profile picture
Tracking Economic Inflection Points To Guide Your Asset Allocation Strategy

Daniel Martins is a Napa, California-based analyst and founder of independent research firm DM Martins Research. The firm's work is centered around building more efficient, easily replicable portfolios that are properly risk-balanced for growth with less downside risk.

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Daniel is the founder and portfolio manager at DM Martins Capital Management LLC. He is a former equity research professional at FBR Capital Markets and Telsey Advisory in New York City and finance analyst at macro hedge fund Bridgewater Associates, where he developed most of his investment management skills earlier in his career. Daniel is also an equity research instructor for Wall Street Prep.

He holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business.

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On Seeking Alpha, DM Martins Research partners with EPB Macro Research, and has collaborated with Risk Research, Inc.

DM Martins Research also manages a small team of writers and editors who publish content on several TheStreet.com channels, including Apple Maven (thestreet.com/apple) and Wall Street Memes (thestreet.com/memestocks).

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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