I presented ZMTP as my favorite investment idea for the year ahead at The Microcap Leadership Summit in September 2019.
My case for share price appreciation in the year ahead was based on these three points:
1.) At the time, the company's share price was being too highly discounted at $0.75 due to largely temporary problems of tariffs that they are dilligently working to remedy. Further to that point, I believe last quarters earnings report demonstrated good growth and progress on margins as the company has plans to shift most of its manufacturing out of China in the coming quarter. If you subtract the ~$1 million the company paid in tariffs, they would have reported ~$800k in profits, or $0.04 EPS.
2.) The company's recent sales and marketing staff additions and their strong contacts and histories of selling into large ISPs and MSOs could drive substantial growth if they see success in this strategy. Motorola used to be a preferred brand of many network operators for customer premesis equipment (CPE) and this should be a fairly easy sell once products are updated with this goal in mind. Joe Wytanis made some comments on last quarters call that new product introductions expected in early 2020 have been designed with input from these prospective customers, so I remain optimistic about this strategy bearing fruit.
3.) The recent investment from Jeremy Hitchcock and alliance with his company, Minim, gives ZMTP a low risk, low investment foot in the door to selling home network security services (IoT, WiFi, and parental controls) and could strengthen ZMTP's prospects for selling CPE into the ISPs and MSOs who are looking to white-label Minims software and offer it to their customers, as well as strengthens ZMTP's direct to consumer offerings with ZMTP's own white-labeled version of Minim's software tools for managed Wifi, IoT security and parental controls.
I think 2020 has good potential to be a transformative year for this company as it focusses on these strategies for profitable growth.
I made ZMTP is a core holding of mine in the $0.80 cent range over the summer of 2019 and am looking to hold it for long term gains on a rebound to its former highs over $3 or more per share based only on success in point 1 above, they have blue sky potential for the upside with their sales strategy targeting service operators and home network security applications.
"Our houses are such unwieldy property that we are often imprisoned rather than housed in them." - Henry David Thoreau, Walden: Economy, 1854
