Emcore has a strong-buy rating. How much could it gain?

Emcore has a strong-buy rating. How much could it gain?

Stock markets were climbing up during the last month. The S&P 500 gained 14%, and other U.S. futures managed to profit as well. The Trump administration has begun planning to reopen economic activity.

Some governors agree with the President about lifting the lockdowns, while others decided to tighten social distancing restrictions for now. However, some market strategists believe that the worst is already behind us.

If their forecasts are right and the markets are just a few months away from a breakout, then now is the best time to grab some shares, until the prices skyrocket again.

Emcore Corporation is a good stock to begin with. This is a technology company. And it has strong links to the defence industry. Emcore produces micro-electromechanical systems and mixed-signal optics that underlie lots of leading aerospace and defence systems. Furthermore, the company’s products are vital components in navigation systems.

Emcore missed earnings expectations in the third quarter by 12 cents, and it also reported a 29 cent per share loss versus a forecast of 17 cents. However, the stock showed a strong sequential improvement in the fourth quarter. While the company recorded a net loss, it was only 8 cents, much better than the 22 cents forecast. And revenue in the final quarter of 2019 rose to $25.48 million, growing by 6% from the year-ago quarter.

How does the stock fare during the coronavirus pandemic?

The lockdowns are hurting Emcore’s production capabilities, along with the other numerous companies. However, it will probably get pent-up demand due to its contractual ties to the defence establishment as normal or near-normal work resumes.

Riley FBR’s analyst Dave Kang noted that Emcore’s business should benefit from increased telecommuting. He thinks that when California lifts its lockdown by the end of May, it’s Aerospace/Defense business should kick into a high gear immediately based on strong pent up demand.

Kang’s $5.80 price target for the stock has a 122% upside potential over the year. However, the stock is trading at a low $2.61 now. Its average price target of $5.10 suggests a 95% upside growth in the coming 12 months.

 

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