Freedom Broker likes telematics company Ituran on dip, says 'buy' on 2-month horizon

Now is a good time to buy shares of Ituran Location and Control, a U.S.-listed Israel-based small-cap provider of satellite-based transportation monitoring services, Freedom Broker says. Over the last three weeks, its stock price has fallen nearly 17%. But this is temporary, Freedom Broker thinks, with the selloff opening opportunities to build up a long position.

Freedom Broker has issued a short-term trade idea to buy shares of Ituran on the dip, according to a note to clients seen by Oninvest. The stock is off almost 17% at $34.45 per share after the company published its quarterly earnings on August 19. Ituran missed the Wall Street consensus forecast for EPS, which came in at $0.68 versus the expected $0.71. Revenue rose 2% year over year to $86.8 million.

Freedom Broker considers the correction in Ituran excessive. Its analysts have set a two-month target price of $38.10 per share, implying 10.6% upside from the September 8 closing price.

Ituran’s problems are of a one-off nature, in the view of Freedom Broker's analysts. The company incurred expenses for its 30th anniversary celebrations, while an FX revaluation, in particular the stronger shekel, also pressured margins. The management has pledged to stabilize the situation by year-end, Freedom Broker argues.

Another factor supporting the "buy" idea is Ituran’s expansion of partnerships with global car and motorcycle brands. In August, the company announced agreements with BMW Motorrad Brasil and Yamaha.

At the time, CEO Eyal Sheratzky said this marked the beginning of a much larger market opportunity. He pointed out that motorcycles are the primary mode of transportation in many parts of the world. Brazil is to be the company's starting point, with plans to enter other fast-growing two-wheeler markets by working with local original equipment manufacturers and developing aftermarket sales.

Freedom Broker also warns of risks. Although the two-wheeler market is expanding rapidly in Latin America, theft remains a key issue. In the medium term, this could pressure average revenue per user, the analysts say.

Meanwhile, Sheratzky himself told Oninvest in an exclusive interview that there is "no doubt" that higher levels of crime and violence translate into higher demand for Ituran services.

Freedom Broker adds that investor concerns about revenue per user may be outweighed by a dividend yield of more than 5.3% after Ituran declared a dividend of $0.50 per share in late August.

Ituran shares have only two Wall Street analyst recommendations, and both are "buy" ("buy" and "overweight"), according to MarketWatch. Their average target price of $47 per share implies upside of more than 36%.

The AI translation of this story was reviewed by a human editor.