TASER's (TASR) Valuation Seen as 'Too Attractive to Ignore'; Ladenburg Thalmann Raises Rating to Buy

(Updated - November 18, 2015 10:03 AM EST)

Ladenburg Thalmann upgraded TASER International (NASDAQ: TASR) from Neutral to Buy with a price target of $24. Analyst Glenn G. Mattson thinks concerns are priced in and he described the stock's valuation as "too attractive to ignore."

The biggest issue affecting shares of TASER is the higher spending that has resulted in lower EPS estimates into 2016, noted Mattson. In the analyst's opinion, investors should view the higher spending as cap-ex rather than opex.

"We believe the stock's decline is a result of falling earnings expectations related to higher opex, growing competition in the on-officer video market, as well as a decline in the rate of growth for the weapons segment. We believe that all of these concerns are valid, but priced in at this point," said Mattson.

The analyst continued, "Taser’s weapons business producing solid cash flow, TASR is rightly investing in a very large second end market. TASR is investing in a robust sales channel to capture a significant share of the market early. This results in higher spending negatively affecting EPS, though this is really an investment that if successful will produce a steady stream of revenue from video. We are still cautious on the potential for the international video segment and hesitate to fully endorse the large spending increase allocated overseas until we see further traction. That said, we believe TASR is poised to win the London Metro Police contract (as London Mayor Boris Johnson committed to buying 20,000 devices at the conclusion of a trial with Taser cameras), and that could serve as a potential catalyst to broader adoption in northern Europe."

Mattson added, "While we remain cautious on the outlook for international we think that the company’s valuation at these levels makes sense even if TASR never sees broad adoption of video from abroad. We think that the spending has two potential outcomes: either it will be successful or it will be temporary. If the company cannot generate significant traction overseas after a couple of years, management can cut resources and focus on driving profitability in a domestic market which we expect the company will dominate."

Mattson values TASER’s weapons business and the domestic video business at $21 per share. International is valued at $1.50, and the company has $1.90 in net cash, leading to a sum of the parts valuation of $24.

For an analyst ratings summary and ratings history on TASER International click here. For more ratings news on TASER International click here.

Shares of TASER International closed at $16.76 yesterday.

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