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Why Rekor Systems Stock Is Plunging Today

By Lou Whiteman - Updated May 11, 2021 at 1:23PM

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Wall Street is adjusting expectations downward.

What happened

Shares of Rekor Systems (REKR 12.43%) fell more than 20% on Tuesday following the company's quarterly earnings release. Investors were already nervous about the company heading into earnings season, and the results did little to reassure the skeptics.

So what

Rekor makes license plate recognition systems and traffic monitoring devices. After markets closed Monday the company reported a first-quarter loss of $0.15 per share on revenue of $4.22 million, a mixed result when compared to analyst expectations for a $0.09-per-share loss on revenue of $4 million.

A camera pointed at a car.

Image source: Getty Images.

Revenue was up 164% from $1.6 million in the first quarter of 2020, but higher-than-expected operating expenses ate into results. CEO Robert A. Berman said in a statement the results "demonstrate substantial ongoing year-to-year improvement," with growth accelerating in both commercial and government sectors.

The stock was already under pressure heading into earnings: There is speculation that legislation introduced in the Texas and Florida statehouses that would lead to an uptick in Rekor sales is unlikely to pass. Rekor currently has a contract with the state of Oklahoma to use its cameras to check for uninsured motorists, and the company has been hopeful of winning similar deals with Texas and Florida.

Now what

The quarter was a disappointment, but the fate of the legislation in Texas and Florida is a much bigger deal for the company. Rekor believes there are still avenues to pursue to win the business, and it does seem likely that tech will increasingly be part of the solution to problems like uninsured drivers, but the timing of the deals is uncertain at best.

Shares of Rekor in late April were up nearly 200% year to date on anticipation of legislative wins, and even after giving back most of those gains in recent trading sessions are still beating the market in 2021 with a 25% gain. Given the uncertainty, it seems few investors are willing to buy into the potential right now even after the declines.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Rekor Systems, Inc. Stock Quote
Rekor Systems, Inc.
$2.08 (12.43%) $0.23

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