Our Stock of the Week is CompoSecure (CMPO). CompoSecure dominates the metal credit card business. It designs and makes payment cards for 8 of the top 10 U.S. card issuers, including JPMorgan Chase (JPM) and American Express (AXP). It holds over 80% market share in the metal card space and recently had great success with a 3% Cash Back card for Robinhood (HOOD). The company could also benefit if JPMorgan Chase (JPM) acquires the Apple card business presently owned by Goldman Sachs.
The company incorporates its Arculus authentification system into the cards and offers digit asset storage and security. The extra security layer combined with the cards’ attractive design is driving strong interest.
One of the main drivers of the stock in the past few months was a restructuring of its complex corporate situation. The majority holder of CMPO is now Resolute Holdings, which is controlled by the David Cote family. David Cote is the highly regarded ex-CEO of Honeywell International Inc. (HON) and is now the company’s executive chairman.
After the completion of the deal, the company announced, “We plan to focus our efforts on enhancing the Company’s organic growth and operational efficiency while evaluating ways to further diversify its customer base and business mix through M&A.” The company is now well-positioned to seek acquisitions and has added Tom Knott to its Board of Directions. Mr. Knot was formerly the CEO of Goldman Sachs Acquisition Holdings.
The company has been a steady eps grower and is expected to continue to grow at 12-14% over the next few years, with an eps estimate of $1.25 in 2025. It trades with a trailing PE of 14, but the potential for acquisitions, new deals, and operational streamlining is attracting further interest.
On October 2, Lake Street increased its target for the stock to $18 from $14 due to rumors that JPMorgan Chase (JPM), which is a CMPO customer, may take over the titanium Apple Card program from Goldman Sachs (GS). This has significant potential for CMPO, which is JPM’s exclusive metal card manufacturer.
Technically, the stock has been performing very steadily and is testing highs and a potential breakout. The chart is extended here, but the potential for new deals should provide strong support. The company will announce third-quarter earnings around November 7.
As always, we plan to trade the stock aggressively and will not chase strength on Monday morning.
This post is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this post. Do not buy, sell, or trade the stocks mentioned herein. We WILL actively trade this stock differently than discussed herein. We will sell into strength and buy or sell anytime for any reason. We will actively trade into any unusual activity. At the time of this post, principals, employees, and affiliates of Shark Investing, Inc. and/or principals, clients, employees, and affiliates of Hammerhead Financial Strategies, LLC, directly or indirectly, controlled investment and/or trading accounts containing positions in CMPO. To accommodate the objectives of these investing and/or trading accounts, the trading in these shares will be contrary to and/or inconsistent with the information contained in this posting.
