TASER Inc. (TASR) is an American developer and manufacturer of electrical weapons, body cameras, and other products. These products are purchased by law enforcement, military, and private security companies. In the past week, Taser Inc. has been all over the news after the alleged unlawful shooting of Mike Brown by Ferguson Police Officer Darren Wilson.
While this may seem to be unrelated to TASER, the riots over the incident are actually one of the leading causes for TASR’s 22.13% surge in the past week. That is because now there is great speculation that law enforcement across America will move to wear body cameras that are produced by TASER Inc. The speculation comes after this difficult case in which there are conflicting reports about events, a situation that many believe could have been avoided if police wear camera vests.
Second Quarter results
The possible increase in sales could be welcomed news for TASR after their recent quarterly earnings report. The company reported net sales of $37.2 million missing estimates by $300,000 but reported $0.07 per diluted share beating analyst estimates of $0.05 EPS. TASER Weapons segment revenues grew $2.4 million year-over-year, or 7.9%, to $32.7 million in the second quarter of 2014.
EVIDENCE.com & Video segment revenues increased by $2.6 million, or 136.5%, to $4.5 million in the second quarter of 2014 in comparison to the prior year. AXON cameras and EVIDENCE.com service bookings increased $9.3 million, to $11.3 million, over second quarter 2013 bookings of $2.0 million.
Recent Spike in stock price
In the past week, the stock price has increased 22.13% or about $180 million in market capitalization. As a reference, according to the company’s most recent 8K’s net income, this spike in market capitalization is equivalent to about one year of revenue.
The company currently has a trailing P/E (ttm, intraday) of 46.15. P/E values that are unusually high can sometimes be justified by speculation of future growth, but in the case of TASER it seems highly unlikely, even with recent developments.
Speculation vs Reality
Yes, TASER is the leading company in the news right now that would potentially sell police vest with cameras, but let’s remember that they are not a monopoly of vest cameras. There are other security companies out there that might be able to produce the vests for a better cost and hindering the revenue potential of TASER international.
If investors agree that TASER will see growth from this segment and the extremely high market premium is fair, then they should consider investing in the company. Instead though, it seems as though TASR will be at the mercy of a boom and bust news cycle which is currently being influenced by the ongoing Ferguson ordeal. Yes, there may be at best a pro-activist campaign influencing police to buy camera vests, but the amount that TASER itself would have to sell to justify its current market value, after the surge, is highly unlikely.
We currently have TASR as a Zacks Rank #3 (hold) due to stable earnings estimate revisions in the past year, though average positive earnings have surprised by 68.22%. We also have the company in the protection-Safety industry and have it ranked in the bottom 32% of all industries.
Clearly, many police departments will have to get on board with the vest camera idea in order to justify TASER’s surge. Whether or not this happens is tough to say, though investors will want to pay close attention to events in Missouri, and to see if municipalities around the country clamor for these vests as a way to prevent these types of incidents in the future.
It will also be a good idea to watch earnings estimate revisions here, as this could definitely signal whether analysts believe in the hype, or if they think it is just a news-driven boom. Should TASR’s prospects start to move up on this front, look for the stock to be upgraded to ‘buy’ territory, but otherwise, the stock looks extremely risky right now, and especially so after the recent massive move higher.
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