Should you by GRID stock ahead of Q3 results?

Beacon Securities analyst Gabriel Leung maintained his “Buy” rating and $7.00 target on Tantalus Systems Holdings (Tantalus Systems Holding Stock Quote, Chart, News, Analysts, Financials TSX:GRID), saying demand for electricity grid modernization remains strong despite longer utility purchasing cycles and rising component costs.

Leung said in his Nov. 2 report the Vancouver-based company’s third-quarter results, scheduled for release after markets close Nov. 11, should provide further insight into its order backlog and the pace at which utilities are adopting its smart grid technology.

The analyst expects Q3 revenue of US$14.6-million and approximately break-even Adjusted EBITDA, compared with consensus forecasts of US$15.1-million and US$400,000, respectively. His revenue estimate represents a 2.5% increase year-over-year but a 5.6% decline from the previous quarter.

Tantalus provides hardware and software that help approximately 330 public power and electric cooperative utilities monitor and automate their electricity distribution networks.

Leung thinks a key measure of future growth will be the company’s TRUSense order backlog, which includes technology that gives utilities greater visibility into conditions across their distribution systems. At the end of the second quarter, approximately 77 utilities had placed TRUSense orders, with 37 moving beyond the pilot stage. Continued adoption would support revenue growth as customers progress from testing the technology to broader deployment.

Leung said recent results from Tantalus channel partner Itron are evidence that utilities remain committed to modernizing their networks, even as regulatory approvals delay some contracts. He said similar conditions are affecting Tantalus, with geopolitical uncertainty contributing to longer purchasing decisions.

However, management has reported no contract cancellations, and several orders delayed earlier in the year were completed during the third quarter. Leung believes this distinction is important because delayed orders could still contribute to future revenue rather than representing lost business.

Component inflation remains another concern, particularly for Tantalus’s connected devices. The company has secured approximately one year of supply for its custom application-specific integrated circuits, providing some protection against near-term cost increases. Tantalus also implemented its first connected-device price increase in three years on Oct. 1, with no reported customer resistance.

Leung argues that the ability to pass higher component costs to customers could help protect margins if inflation persists beyond the period covered by existing supply arrangements.

He remains positive on the company’s longer-term prospects, citing its established utility customer base, expanding product portfolio and regulatory support for grid modernization.

Leung’s unchanged $7.00 target is based on four times estimated calendar 2027 enterprise value to sales.

He expects Tantalus to generate Adjusted EBITDA of US$2.3-million on revenue of US$61-million in fiscal 2026, improving to Adjusted EBITDA of US$5.2-million on revenue of US$72.8-million in fiscal 2027.

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