Taser Has 'Razor And Razor Blade' Model

Imperial Capital’s Jeff Kessler believes that TASER International, Inc. TASR is a market leader in the conducted electrical law enforcement weapons segment, and has a growing customer base with annual recurring revenue.

Kessler initiated coverage of the company with an Outperform rating, with a price target of $27, representing 22 percent upside to the current stock valuation.

Leader In Its Category

“Over 17,000 domestic law enforcement agencies are currently deploying TASER’s solutions, with over 105,000 weapons and over 36,000 Axon cameras sold in 2015,” the analyst mentioned.

Kessler believes that TASER’s “unaided” brand awareness, along with the company’s business model and very high market share, gives it a meaningful advantage over the competition in the non-lethal weapons category.

The analyst also noted that the company’s competitors did not have “a similar level of depth in its product portfolio,” nor did they offer a “cloud-enabled forensic solution” to support their hardware offering or have long-term relationships with law enforcement agencies.

“Although TASER has historically generated the bulk of its profits from the sale of its hardware/weapons, its TASER Weapons segment margin of about 70 percent rival those of many software companies,” Kessler stated.

Business Model

The analyst explained that the company has a “razor and razor blade type” of business model, with organic recurring revenue through the cartridges sold by its Weapons business, along with batteries and warranties.

Management is currently focused on transforming TASER into a services leader, targeting over 70 percent of Axon’s revenues from software and services, and only 30 percent from products, in the long term.

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