Please ensure Javascript is enabled for purposes of website accessibility

Why Rekor Systems Stock Is Plunging Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.