Why FLIR Systems’ inventory just jumped 14%

What happened

Thermal imaging camera manufacturer actions FLIR Systems (NASDAQ: FLIR) are up 14.4% as of 12:35 p.m. EDT, and if you think that has something to do with the novel coronavirus — you’re right!

This morning, Reuters reported that Amazon.com has started deploying thermal imaging cameras in its warehouses to help identify employees who may have above-normal temperatures (an early indicator of COVID-19 infection) .

Image source: Getty Images.

So what

Amazon doesn’t say who it bought the cameras from, but investors believe it could be FLIR – or that other companies could buy from FLIR in imitation of Amazon.

Two investment banks further support this thesis, Raymond James and William Blair publishing notes in support of FLIR shares. In a covered note the TheFly.com Today, Raymond James explains that it has a strong buy rating on FLIR, as the company could benefit from increased sales of thermal cameras for detecting high skin temperatures. William Blair expressed doubts that Amazon bought its cameras from FLIR but notes that FLIR is nonetheless “the world leader in uncooled thermal cameras” and therefore the logical choice to benefit from “what could become a major trend. “among employers in general.

Now what

How should investors react to this news? Blair’s advice may be the best here, explaining that net-net, COVID-19 could end up being neither good nor bad for FLIR stock, as further sales of thermal cameras to detect COVID-19 infections could just offset sales lost to industry due to the recession.

That being said, with FLIR stock falling more than 30% over the past year, it seems investors are still focusing only on lost sales and not those potentially gained from a FLIR perspective as as fever detector. The stock is still not a good deal at 27 times the earnings, of course – but at least it’s cheaper than it used to be, and now, potentially, still as strong as it once was.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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