When Will Taser's Impressive Revenue Growth Translate To The Bottom Line?

TASER International, Inc. TASR is readying to boast record-high annual revenue upon release of its fourth quarter and 2016 earnings March 1.

The company’s first three quarters exceeded 2015 sales by 31 percent, and Oppenheimer expects in-line or outperforming results in the remaining 2016 reports.

The firm noted that, thus far, the most surprising element of the sales outperformance was distribution among product segments, with conducted electrical weapons (CEWs) comprising 20 percent of total growth and body cameras and EV.com meeting the additional 11 percent.

Bolstered by international sales and the TASER 60 subscription plan, CEW sales continued to defy the product’s reputation as a slow-growing component of the company line. Weapons sales have beat estimates for five consecutive quarters, and TASER still has room to expand its CEWs into international and complementary markets.

But analysts debate how long the company can sustain its positive CEW run.

Potential For Police Contracts

Among law enforcement contracts, weapons sales will depend on a few factors.

For departments budgeting “needs” over “wants,” TASER has long held the competitive edge. But the recent emergence of other industry players with equivalent capabilities — including “a comprehensive hardware to software suite, unlimited cloud storage and basic digital evidence management platform functionality” — will eventually force TASER to differentiate itself solely by price.

Related Link: Taser Stands To Benefit As Police Departments Using Competitor Report Equipment Failures

Still, TASER’s innovations appear to hold the advantage among departments capable of costlier investments. In particular, the company’s recent acquisition of video-analyst Dextro, Inc. as well as Misfit’s computer vision team lends it appeal over competing contractors.

Yet, Oppenheimer recognizes room for improvement.

“In summary, If TASR can develop a ‘want’ feature that ultimately becomes a ‘need’ feature, and is the only vendor that can provide this service or feature, we could again get more comfortable with the viewpoint that TASR can meaningfully drive EVIDENCE.com ARPU higher,” firm analysts wrote.

Capacity For Financial Growth

Financially, analysts expect improvement with growth from just two of three critical areas: bookings, revenue or EPS. Any combination of positive figures will enhance stock value. Oppenheimer also noted a dependence on inspiring more frequent product replacements, solidifying future cash flow and developing another service akin to Axon’s bundled subscriptions.

But the firm predicted little leverage in TASER value throughout the year, considering no expected sales in AI-RMS or first-half revenue from dash cameras.

Analysts added that, while TASER shareholders can expect near-term benefits, the future of that dynamic is uncertain.

Oppenheimer reiterated a Perform rating on the stock, which traded around $26.43 at the time of publication.