Buy Tantalus Systems on the dip, this analyst says

Beacon Securities analyst Gabriel Leung says a management update from Tantalus Systems (Tantalus Systems Holdings Stock Quote, Chart, News, Analysts, Financials TSX:GRID) supports his view that the company’s recent share-price weakness is not reflective of its fundamentals.

Leung maintained his “Buy” rating and $7.00 target on Tantalus in his Sept. 10 update. His target is based on four times his calendar 2027 EV/sales estimate.

“Our takeaway is that the sharp decline in the company’s stock price is not reflective of the fundamentals of the underlying business,” Leung said.

Vancouver-based Tantalus develops smart-grid technology for public power and electric cooperative utilities. The company serves about 330 utilities.

After speaking with management, Leung said customer decision cycles remain long, but contracts have not been cancelled. Several contracts pushed out of Q2 have since closed in Q3.

Tantalus also continues to see traction with TRUSense. During Q2 results, the company said 77 utilities had placed orders and 37 had moved beyond the pilot phase.

“Overall, the company remains confident in its ability to add 20 new utilities this year,” Leung said.

Rising component costs remain a headwind, but management said Tantalus has secured about a year of custom ASIC supply to ease near-term margin pressure.

The company also plans to implement its first price increase in three years on Oct. 1 for its connected devices. Management said it has not seen customer pushback so far.

Tantalus recently announced a partnership with Calix, which supplies broadband and smart-grid capabilities to U.S. electric cooperative utilities. The agreement will integrate Calix’s optical network terminal into Tantalus’s TRUSense Fiber and Ethernet Gateways.

Leung said the partnership should help Tantalus pursue more electric cooperative utilities deploying fibre and strengthen TRUSense’s market position.

The analyst said Tantalus has about $30-million of cash, no tariff impact and a supportive regulatory backdrop, particularly around data centre deployment.

Leung expects Tantalus to generate Adjusted EBITDA of $2.3-million on revenue of $61.0-million in fiscal 2026, improving to Adjusted EBITDA of $5.2-million on revenue of $72.8-million in fiscal 2027.

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