ATS Automation could be ready for a rally, this investor says

Factory automation company ATS Automation (ATS Automation Stock Quote, Chart TSX:ATA) took it on the chin last quarter but the stock could be in for a recovery with its seasonally strong period coming up, says analyst Brooke Thackray of Horizons ETF Management Canada.

Down 34 per cent from a high of $24.67 set on October 1 of last year, ATS Automation has climbed nicely over the past month to where it now trades in the $16.00 range. Looking at the historical chart, Thackray says that the stock has a decent support level at in the $12-13 range.

“We’ve seen a bit of a pullback with the rest of the marketplace,” Thackray told BNN Bloomberg Monday. “We’re looking at around $12 or $13 as far as support goes. It’s pulling back today in this type of market, which is not typically a good thing, but we’re starting into the seasonal period where it tends to perform well, towards the end of January.”

“I think it should do okay. It’s not my favourite stock but it should do okay,” he says.

Cambridge, Ontario-based ATS last reported its quarterly earnings on November 7, when the company posted total revenues of $283.6 million, a three-per-cent improvement year-over-year, and net income of $10.8 million or 11 cents per share, down from $13.8 million or 15 cents per share last year. Those numbers were below analysts’ expectations, however, which called for a $310.1-million top line and net income of 20 cents per share.

After effectively trading sideways for years, ATA broke out in late 2017 as the company saw its orders in the healthcare and electric vehicle segments grow. This month, investment bankers GMP Securities reiterated its faith in ATS Automation by choosing it again as a Top Pick based on strong organic fundamentals.

“The most recent quarter missed sales estimates due to delays in revenue recognition, but we do not consider this a break in our thesis of ATS capitalizing on a booming automation industry with a new CEO in place,” said GMP analyst Justin Keywood. “Record bookings, up 36 per cent in the past nine months point to continued momentum.”

“As elevated growth contributes, margin expansion initiatives should progress and a solid balance sheet supports M&A. We see the recent share weakness as providing a good buying opportunity for what’s ahead,” Keywood says.