Shares of mobile Internet of Things company CalAmp (CAMP -1.42%) are hopping this morning, up 16.7% as of 12:50 p.m. EDT -- and for more reasons than just generalized market enthusiasm over Gilead Sciences' new anti-coronavirus drug.
So what is the reason CalAmp is rising so high today?
This morning, investment banker Jefferies & Co. announced it is upgrading shares of CalAmp from hold to buy, reports TheFly.com, and is assigning the stock an $8.25-per-share target price.
Since CalAmp shares cost less than $5 a share before the upgrade, and Jefferies only thought it was worth $5.50 before, this is a sizable boost to sentiment surrounding the stock. Basically, Jefferies is saying that it expects the stock to rise 65% in value over the course of the next year, and so even after today's run-up, there's still a good 42% worth of gains yet to be had.
There's 42% worth of gains yet to be had -- if Jefferies is right about CalAmp. So...is Jefferies right?
According to the analyst, worries over the effects of COVID-19, plus other concerns about the business, have subtracted 63% from CalAmp's stock price over the past year. And yet, the analyst notes, 35% of CalAmp's business comes in the form of recurring revenue that is likely to continue through the current recession. And as for the remaining 65%, it seems unlikely CalAmp will lose all of that, no matter how bad the economy gets. In short, the downside risk on this stock has already been priced in -- "plus some," says Jefferies.
At a current valuation of less than 0.5 times sales and a history of generating significant free cash flow on those sales in most years, CalAmp stock does indeed look attractively priced today.