Buy Lantronix for a double, this analyst says

Roth Capital Partners analyst Scott Searle says Lantronix’s (Lantronix Stock Quote, Chart, News, Analysts, Financials NASDAQ:LTRX) acquisition of Vecima Networks’ industrial IoT platform strengthens its recurring revenue profile while highlighting underappreciated growth in drones and edge AI.

In a July 8 report, Searle maintained his “Buy” rating and $10.00 target on Lantronix.

Lantronix agreed to acquire Vecima’s global asset-tracking software-as-a-service platform, Nero, for $11.5-million in cash, including an earnout. Searle said the deal values the business at about 2.2 times EV/sales and is expected to add about $0.02 to annual EPS.

“While near-term supply issues persist, we believe the market is missing the emerging growth opportunity in LTRX,” Searle said.

The acquisition adds about $5.3-million of trailing-12-month revenue, including roughly $4.5-million of high-margin annual recurring revenue from about 125,000 connected devices.

Searle estimates the acquisition will increase recurring revenue to about 10% of total sales, while recurring revenue and drone-related business together now account for more than 25% of revenue, up from less than 10% a year ago.

The analyst said the high-margin recurring revenue should lift Lantronix’s gross margin sustainably into the 45% range, while Nero’s annual recurring revenue is expected to grow by more than 10%.

Searle also remains positive on the company’s drone business, which he expects to contribute $10-million to $14-million of revenue in fiscal 2026, with sales potentially doubling in fiscal 2027 as defence spending, customer adoption and international opportunities expand.

He also sees future opportunities in robotics through Lantronix’s relationship with MediaTek beginning in fiscal 2027.

Searle expects fiscal fourth-quarter revenue to come in near the midpoint of guidance at $31.0-million, reflecting continued strength in drones and software despite ongoing component supply constraints.

“We believe that as macro concerns and the fixation around AI and space subsides, investors will revisit the drone- and ARR-driven growth and expanding profitability of LTRX,” Searle said.

Searle expects Lantronix to generate Adjusted EBITDA of $6.2-million on revenue of $120.8-million in fiscal 2026, improving to Adjusted EBITDA of $13.8-million on revenue of $141.4-million in fiscal 2027.

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