Dougherty Less Enthusiastic on Taser (TASR), Downgrades to Neutral

Dougherty & Co downgraded TASER International (NASDAQ: TASR) from Buy to Neutral and removed its price target (prior $19.00). Analyst Gregory McKinley is less enthusiastic about the stock.

"TASR delivered an OK March quarter, but one that fell short of our expectations on a couple of fronts including CEW sales and AXON/evidence.com bookings," said McKinley. "TASR has laid out its case for the economic and technology drivers of adoption of its on-officer video product and upgrade cycle for its CEWs and believes it has identified ancillary opportunities to expand its cloud computing offerings along with international focus markets for its core CEW business. The combination of these opportunities is the basis on which TASR has chosen to ramp investment in its business with SG&A and R&D initiatives in 2014, although the rate of expense growth is above our expectations."

"From a valuation perspective, we impute an equity value of $11 per share for TASR’s CEW business. Using this framework and the current ~$16 stock price, we estimate the market is valuing the video segment at ~$5 per share, or $275 million. As such, we believe upside in TASR shares must be driven by rapid development of the video segment business in 2014 and 2015. As we noted in our April 11 note, we are encouraged by signs that AXON and Evidence.com are accelerating and we have identified several large agencies testing the solution. However, we now find ourselves reducing earnings estimates on higher spending, which leaves us less enthusiastic about a stock already carrying a premium growth multiple. We have reduced our FY15 EPS estimate from $0.54 to $0.43 and, at ~$16, shares are valued at 38x multiple. As such, we are lowering our rating on shares back to Neutral," he said.

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 $16.15 yesterday.

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