Technology stocks have not exactly prospered in recent weeks. The tech-heavy Nasdaq Composite (^IXIC -0.52%) index has dropped more than 5% in the last two months while the S&P 500 market tracker traded slightly up:
CalAmp (CAMP -3.00%) has been one of the Nasdaq's worst performers in this period. What happened to the high-flying tech darling, and where is CalAmp going next?
The backstory
CalAmp came into 2014 on a full head of steam. The company uses wireless connections to collect and process data from all sorts of machines, making CalAmp a pioneer in the Internet of Things field. Where machines talk to other machines without any meddling humans in the middle, CalAmp wants to manage the communications.
The stock more than tripled in 12 months before peaking in early March. From there's it's been a 49% downhill ride for CalAmp investors:
The dramatic 10-month rise is easy to understand. CalAmp is an early leader in a red-hot market, and you know what they say about early birds.
But it's not good enough to arrive early to the party. You have to execute as well, and CalAmp investors started losing patience with the company's execution in the spring. The situation came to a head in April, when the company reported somewhat disappointing sales and earnings and issued soft next-quarter guidance.
So where does that leave CalAmp investors today? I think FBR Capital analyst Scott Thompson nailed it in a late March research note: "While we still think the opportunity is substantial in the long run, we adjust our expectations for a more conservative 2014."
That conservative price target still looks out of place at $29 per share, but the sentiment is about right. CalAmp is an attractive stock for two classes of investors right now: opportunistic day traders who love big volatility, and patient long-term owners who don't mind suspension-wrecking speed bumps as long as the final destination looks sunny.
Image source: CalAmp.
What's next?
CalAmp has a lot going for it, including machine-to-machine communications contracts with several top-shelf customers. It's also easy to get excited about CalAmp's skyrocketing revenue and generally positive cash flow.
All things considered, I wouldn't back up the truck to load my life savings into this stock, given the intense competition that CalAmp is up against. But at this sudden discount, it's an interesting company for further research or a small, speculative position.
I can't promise market-stomping returns from here, but CalAmp is looking at enough opportunity in the Internet of Things market to make me excited about the roller-coaster ride ahead. At the very least, CalAmp deserves a thumbs-up rating in my CAPS portfolio today.
