AI Driven Decisions : Rekor Systems : Fad or Future Leader?

AI Driven Decisions : Rekor Systems : Fad or Future Leader?

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AI Driven Decisions : Rekor Systems : Fad or Future Leader? Rekor Systems (NASDAQ: REKR) is a company in the smart mobility space that concentrates on producing video systems and software capable of recognizing and identifying road vehicles. Given the rise of interest in the field of artificial intelligence and its intersection with driving and the automobile industry, it’s no surprise that Rekor is garnering attention.

Recently, though, Rekor’s stock price has dropped significantly from its late April high of 25.38.

Its price halved in little more than a week. This depression in share price is associated with the belief that core deals with certain state and municipal governments might fall through. Investors were also disappointed in the quarterly loss of $0.15 per share, as analysts predicted a $0.09 per share loss [1]. Is Rekor a stock with potential that is being overlooked, or is its stock price plummeting for good reason?

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Rekor’s target customer base is primarily government agencies and municipalities. 

It offers a small collection of core products. One of them is Rekor Scout, a line of cameras that are web-connected and can accurately identify information on moving vehicles[2]. It also supports the enhancement of existing Internet-connected cameras with a host of recognition tools, including license plate, car make, and car color identification. Rekor Scout and its Rekor One platform has already seen use by law enforcement and traffic authorities.

Rekor also sells to commercial clients, providing its services for use in parking, retail, and community security.

It develops Rekor Go, a smartphone app that supports license plate recognition and compares an identified plate to a user-determined list of approved plates.

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Even though it was recently established from a restructuring of company AOC Key Solutions in early 2019, Rekor has seen success in reaching a number of business customers. Already, it is seeing use with law enforcement in some Florida and Tennessee towns and the State of Oklahoma’s UVED program tracking uninsured vehicles. One of Rekor’s pilot commercial customers is MasterCard. Rekor is helping the traditionally credit card-oriented firm expand to AI-driven menu boards in restaurants.

Though concept-wise Rekor seems like a hot company, it has not reached financial stability yet.

The firm is still not profitable and made a loss of $13,962,000 in the 2020 fiscal year. Additionally, many of the firm’s expenses are fixed and not adjustable in the short term, meaning that it may be difficult for Rekor to adapt to unforeseen changes in the economic climate. Rekor faces headwinds because it is an upstart in a line of business that has been active for a while. 

This means that it will have to fight to allure customers, and doesn’t have the established reputation that some of its competitors might have. However, one advantage Rekor claims to have is that its software suite is more robust than those of its competitors. Studies conducted by law enforcement and independent engineers have indicated that Rekor has higher accuracy and can identify more characteristics of traveling vehicles (including car make and body type).

Given that Rekor doesn’t have an established financial history, it’s harder to extrapolate from past data and make assumptions about the capabilities of the management piloting the company. 

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Looking at its balance sheet, Rekor is sitting on a comfortable pile of cash as it expands as a business and seeks new clients. As of March 31, 2021, Rekor had $62,845,000 in cash and cash equivalents, comprising nearly 58% of its total assets. At the same time, it had only $5,918,000 in current liabilities and $9,600,000 in total liabilities.

The company’s debt to equity ratio comes out to a favorable 0.1.

What Rekor’s management does need to do, however, is leverage its hoard of cash to expand as a company, develop a positive reputation, and finally become profitable.

Robert Berman serves as CEO and Chairman of the Board of Rekor. He has a history serving in executive positions at a number of investment-related firms. Berman founded Empire Resorts. Empire Resorts is not artificial intelligence at all. But, instead is a company that currently owns the Monticello Raceway and centers itself around New York’s Catskills-area hospitality and gambling industry. However, he does have considerable management experience in tech startups.

Chief Science Officer Matt Hill and Chief Technology Officer Chris Kadoch, on the other hand, demonstrate veritable experience in the tech, and more specifically, the video analysis industry. Matt Hill is responsible for the development of OpenALPR, a popular open-source software suite for license plate recognition. 

Notably, Rekor has recently come under investigation by the Law Offices of Howard G. Smith on behalf of investors for a potential violation of federal securities laws. The plaintiffs allege that future revenue guidance issued by management could be exaggerated by up to 80% [3]. If true, this undermines the credibility of management. Furthermore, the degree of trust between the shareholders and leadership of Rekor Systems. However, these lawsuits are an inevitable occurence when a stock falls considerably.

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Though Rekor is a new company that might not be generating profit yet. Rekor certainly shows potential as a budding tech-based startup.

At its helm is management with real experience. Moreover, it has a number of competitive advantages that might be able to distinguish it from its peers. Rekor also has a comfortable amount of cash.

Rekor Systems (REKR) is an up-and-coming stock that tech investors should still be keeping their eye on.

In conclusion their recent acquisition of Waycare will create an Ai transportation powerhouse!

AI Driven Decisions : Rekor Systems : Fad or Future Leader? Written by Ryan Cunningham

Works Cited

  1. Whiteman, Lou. “Why Rekor Systems Stock Is Plunging Today.” The Motley Fool, 11 May 2021.
  2. Rekor Systems, Inc. Form 10-Q 2021. Web. 15 June 2021.
  3. “INVESTOR ALERT: Law Offices of Howard G. Smith Continues Investigation of Rekor Systems, Inc. (REKR) on Behalf of Investors.” BusinessWire, 8 June 2021.