CalAmp Update Target Price

CAMP : NASDAQ : US$31.72
Target: US$38.00

CalAmp supplies tightly integrated M2M hardware with its COLT
M2M Application Enablement Platform (AEP) cloud to add cellular
and GPS connectivity solutions into several M2M verticals
including: fleet management, asset/trailer tracking, vehicle
finance/recovery/remote start, rail, and smart energy. In its
legacy business, CalAmp supplies outdoor
reception/amplification and indoor network products for DBS satellite TV Appliances.

Technology — Communications Technology — Wireless Equipment
Investment recommendation:
CalAmp CEO Michael Burdiek and Senior VP of Corporate Development
Garo Sarkissian. We believe CalAmp has a strong pipeline entering
C2014 for its higher-margin Wireless DataCom business and anticipate
CalAmp will grow faster than our 16% M2M hardware market revenue
CAGR forecast. We believe CalAmp’s Wireless DataCom business is well
positioned to drive strong F2015 and F2016 sales and earnings growth
trends driven by new usage-based auto insurance contracts, growing
international sales, initial sales to Caterpillar starting to ramp in
2H/F2015, recovering PTC sales in F2015, and anticipated steady
growth of higher-margin Wireless Matrix sales. We maintain our BUY
rating and increase our price target to $38.
Investment highlights
 We believe CalAmp has a strong business pipeline positioning it for
numerous long-term growth opportunities. While we believe fleet
telematics market trends remain strong to drive CalAmp’s C2014
growth, we believe new customers such as Caterpillar, recovering
PTC sales, and potential for ramping insurance telematics should
drive strong C2015 trends.
 With CalAmp’s growing product portfolio delivering integrated
solutions for complex M2M deployments, we anticipate a gradual
improving product mix will result in steadily improving gross
margin with operating margin leverage. While our current model is
based on announced products and solutions, we believe CalAmp is
working on new market opportunities with the potential for a
growing mix of higher margin integrated solution sales.
 Given our belief CalAmp has a strong pipeline combined with the
potential for ramping usage-based insurance sales over the next
several years, we have slightly increased our F2016 pro-forma EPS
estimate from $1.32 to $1.35

Valuation: Our $38 price target is based on shares trading at roughly
28x our F2016 pro forma EPS estimate.



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