Why CalAmp Stock Fell 30.5% in May

What happened

Shares of CalAmp (NASDAQ: CAMP) plunged 30.5% in May, according to data from S&P Global Market Intelligence, when the machine-to-machine communications specialist announced mixed quarterly results, then faced renewed skepticism from Wall Street later in the month.

On the former, CalAmp stock fell as much as 9% on May 1 -- the first trading day after its quarterly update hit the wires -- though it recovered to close down closer to 4%. In that report, CalAmp confirmed its fiscal fourth-quarter 2019 revenue declined 10.6% year over year, to $84.4 million, below its outlook for a range of $86 million to $92 million. But that revenue also translated to adjusted earnings of $9.4 million, or $0.28 per share, near the high end of CalAmp's $0.23 to $0.29 guidance range.

So what

CalAmp CEO Michael Burdiek admitted he was "disappointed" with the light revenue, blaming a combination of lower Telematics Systems segment sales (down 16.5% to $65.4 million), and "lingering supply chain challenges" as the company works to mitigate the impact of tariffs by transitioning away from Chinese suppliers. That said, CalAmp's software and subscription services business saw sales rise 18% to $19 million, and -- with the help of recent software-centric acquisitions -- promises to drive accelerated recurring sales growth.

It certainly didn't help when, near the end of the month, Goldman Sachs analyst Jerry Revich downgraded CalAmp stock to sell from neutral, reducing his per-share price target to $11 from $13 -- though shares closed Wednesday at $10.32, for what it's worth. To justify the call, Revich expressed concern that CalAmp's subscription segment strength will have trouble offsetting the negative impact to telematics of a cyclical slowdown in the truck and construction markets.

Now what

CalAmp should be poised to release its next quarterly update around the end of this month. When it does, we'll be looking for the company to not only live up to its own financial guidance -- which calls for fiscal Q1 2020 revenue of $84.5 million to $89.5 million, and adjusted net income per share of $0.06 to $0.12 -- but also to show progress on the recurring-revenue front while addressing concerns over a broader slowdown in the telematics space.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends CalAmp. The Motley Fool has a disclosure policy.