FLIR Systems: What The Market Is Missing

Aug. 26, 2020 11:08 AM ETTeledyne FLIR, LLC (FLIR)13 Comments
Beulah Meriam K profile picture
Beulah Meriam K
3.31K Followers

Summary

  • The market's sentiment around FLIR has been driven more by surface-level negative internal and external news than by deeper, evidence-based arguments and indicators.
  • At this level, you're basically looking at investing in the company at 2016 prices, when the upsides mentioned here were absent.
  • The analysis here shows why FLIR is an attractive investment at these depressed levels, and outlines the upsides the market seems to be ignoring or, at best, downplaying.

Since the start of the year, FLIR Systems, Inc. (NASDAQ:FLIR) has seen its stock go from around $52 to the current price of around $35, trading at a discount of 35% as of this writing. Heading into the Q4-19 earnings announcement at the end of February 2020, the stock hit highs near the $59 mark, only to drop dramatically to near the $25 level a month later. Since then, positive sentiment leading up to the Q1-20 earnings call pushed the stock back up near the $50 mark, eventually settling in the low $40s. After the Q2-20 call, however, the market again wiped out more than 10% of FLIR's market cap, with the stock now trading significantly below that level.

Source: Seeking Alpha

I believe the market's sentiment around FLIR has been driven more by surface-level negative internal and external news than by deeper, evidence-based arguments and indicators.

Thesis: The analysis below shows why FLIR is an attractive investment at these depressed levels, and outlines the upsides the market seems to be ignoring or, at best, downplaying. I believe investors are being excessively cautious about this stock and not seeing the long-term potential.

FLIR Technical Support Center

A Brief Look at Events Around FLIR's Q4-19 Earnings

When the Q4-19 earnings were released, the continued headwinds in the Commercial Business Unit played a major role in pushing the stock down in an unprecedented manner.

FLIR Operating Segment Results FY-19Source: FY-19 Annual Report - 10-K

Revenues from the unit had been on the decline since 2018, primarily due to the divestiture of the Consumer and SMB Security business. As of FY-2019, the unit posted a revenue decline on the back of "volume declines in the OTS business and Maritime product lines during fiscal 2019."

This was compounded by a continued less-than-optimal outlook for the unit through the end of FY-2020:

We

ChartData by YCharts

This article was written by

Beulah Meriam K profile picture
3.31K Followers
I do deep-dive analyses into the top companies in multiple segments, including retail, consumer goods and technology.

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.

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