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CalAmp: Lojack and Telematics
05/11/2016 7:00 am EST
Our latest recommendation is a leading global firm offering an extensive portfolio of intelligent communications devices, explains Taesik Yoon, editor of The Forbes Investor.
CalAmp (CAMP) enables customers to optimize their operations by collecting, monitoring and efficiently reporting business-critical data and desired intelligence from high-value mobile and remote assets.
The sudden loss of a meaningful profit contributor is a tough pill to swallow. But that's exactly what CalAmp will have to do after EchoStar (SATS) recently said it will stop buying products from the company by the end of August.
Yet thanks to significant growth in its larger and far more promising Wireless DataCom operations over the past several years, this loss isn't nearly as material as it looks.
In fact, substantially all of it will likely be replaced by contributions from its recent acquisition of vehicle tracking solutions provider LoJack.
What's more, we think that the top-line synergies expected from LoJack will accelerate demand for telematics-based solutions proliferates. (Telematics is the merger of telecom and information, such as GPS and navigation systems.)
The expanding application of telematics by the connected vehicle aftermarket and the insurance industry bode well for CAMP's future prospects.
For example, the latter can use the information provided by the company's products to identify quality drivers, monitor high-risk drivers, enable value-added service offerings (such as roadside assistance), and detect accidents in real-time.
This can help insurance companies base their rates on actual behavior instead of estimates, as well as lead to more efficient and accurate processing of claims.
What's more, CAMP can leverage LoJack's extensive relationships within the US auto dealer and commercial heavy-duty equipment channels, and numerous licensees across 30 countries to market its richer product portfolio to a wider base of potential customers worldwide.
This is why we view the tempered profit expectations in the current year due to the pending satellite business loss as simply a brief detour on what should otherwise be a strong and long growth trajectory.
It's also why we think investors will do well to scoop up CAMP's shares at their currently depressed levels. In our view, the sell-off in the stock has created an excellent buying opportunity in our view.
By Taesik Yoon, Editor of The Forbes Investor
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