Investors who've been around a while know to be skeptical when established companies attempt to pivot their business toward hot new trends. It has happened many times in biotech, it happened with the rise of e-commerce and cloud/SaaS, and it's happening again with ag tech as concepts like data analytics and Internet of Things are applied to this huge market.
That doesn't mean that investors should automatically dismiss Iteris (NYSEMKT:ITI).
After all, well-run companies are supposed to figure out how to apply
their existing know-how and expertise into emerging and adjacent sectors
to grow their business. But it does at least argue for investors to
approach this name somewhat cautiously for now.
If Iteris can
build real share in its addressable segment of ag analytics and achieve
the sort of margins and cash flow that other companies have managed with
a SaaS model, a double-digit fair value is not unreasonable. On the
other hand, if the company cannot make a dent in the ag market over the
long term (and/or the market fails to emerge as expected) and the
traffic business performs more or less as it has in the past, a return
to the low single cannot be ruled out.
Read the full article here:
Iteris Expecting Big Things From Big Data