Taser International: Stunning Gains
Analysts love the shares of this electronic control device maker and expect them to rise handsomely over the next 12 months.
Who says crime doesn't pay? Shareholders of Taser International are not only hoping that it pays handsomely, but that it remains a growth industry. Well, maybe not crime exactly, but crime-fighting.
Taser makes those electronic control devices -- stun guns in the vernacular -- used by police and corrections officers, the military and, now, even crime-wary consumers. Tasers temporarily disable threatening or dangerous individuals or those resisting arrest --including unruly college students disrupting political speeches, as seen in the video that went viral last September, making "Don't tase me Bro!" a catch phrase of 2007.
But as much as perps on the mean streets may hate the company's devices, analysts on Wall Street love the company's shares. Most of the seven analysts who cover the stock (symbol TASR) rate it a buy or outperform; none rate it a sell.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Analysts expect earnings to grow at a roughly 50% rate this year and next as Taser penetrates largely untapped markets here and abroad, with essentially no competition. "To us it's a category killer," says Steven Dyer, at Craig-Hallum, a Minneapolis-based brokerage.
JP Morgan is the latest to join the love fest, initiating coverage on February 13 with an "overweight" rating.
Taser, based in Scottsdale, Ariz. logged profits of $15 million last year on $100.7 million in revenues. The Scottsdale, Ariz., company has sold more than 400,000 devices to some 12,000 law enforcement, correctional and military agencies in 44 countries.
Still that's only about 35% of the domestic market and less than 5% of the worldwide market. Taser's penetration rate of the private-security, military and consumer markets is near zero.
International sales, accounting for about 15% of 2007 sales should become a more prominent part of the mix this year. Agencies in some 45 foreign countries are either using or testing Taser devices. On February 11, the company announced that an unnamed foreign country placed an order for 3,000 units. As many as five countries are expected to place significant orders this year.
Consumers represent another solid growth market. Taser's C2 model began shipping in the third-quarter of '07. At this year's Consumer Electronics Show, the C2 made its debut in leopard print, red-hot red and fashion pink (prices ranging from $350 to $380) "for women who want fashion with a bite."
Infomercials about the product began airing in mid-February. The C2 could generate almost 10% of company sales this year, up from less than 4% in '07, estimates Eric Wold of San Francisco-based broker Merriman Curhan Ford.
Taser's challenge for now is boosting gross profit margins, which have sagged lately. The company blames higher raw material costs; cash discounts for distributors; a higher percentage of low-priced products, such as cartridges, in the sales mix; and labor inefficiencies associated with new product introductions and starting a second production shift.
Taser has eliminated the discounts, negotiated price reductions with suppliers and smoothed out payroll bumps by staffing the two shifts so as to eliminate overtime. And the company hired a new operations chief, a 20-year veteran of Intel Corp. All told, analysts on average expect sales to increase 26% this year and earnings to jump 47%, to 34 cents a share.
Despite its promising outlook, Taser is not an easy stock to own if you don't have a stomach for wild gyrations tied to the headline of the moment.
That was made clear in 2005 when news of a Securities and Exchange Commission inquiry sent the stock tumbling from a bit more than $30 -- a peak it hasn't seen since even though the investigation came to nothing. More recently, the stock was on a roll until last October, when news broke that a man had died after being hit with a taser at a Canadian airport.
Taser says its devices have actually saved thousands of lives, by reducing risks to both law enforcement officers and suspects, compared with using guns or other, physical control methods. But use of the devices is clearly controversial. Taser is no stranger to litigation charging wrongful death or injury, but so far, some 61 lawsuits against the company have either been dismissed or decided in its favor.
Still, short-sellers, who have a vested interest in seeing Taser's stock fall, account for nearly a quarter of the float -- that is, the shares available for trading by the public.
The bulls believe that investors committed to the stock long-term will be rewarded. "Do you own it for headlines or for operations? If you own it for operations -- what the company can do, I'm not too concerned," says analyst Wold.
Considering the company's earnings-growth prospects, the stock deserves to trade at 40 to 45 times estimated earnings, he believes. Given his estimate of 52 cents a share for 2009, he thinks the stock, which closed at $11.99 on February 19, could reach $21 over the next 12 months. Other analysts say $17 a share is more realistic. Either way, you're looking at some pretty stunning gains.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
-
Protect Your Loved Ones With an Estate Plan
Here are eight things you can do to help protect your family.
By Mario Hernandez Published
-
Hotels That Give You the Best Value for Your Money, According to Guests
New research reveals the best hotels in the U.S. for value for money according to hotel guests — and why they’re demanding more from their stay.
By Charlotte Gorbold Published
-
Stock Market Today: Dow Outperforms After IBM Earnings
Investors also parsed a strong reading on second-quarter GDP and a dismal decline in durable goods.
By Karee Venema Published
-
Stock Market Today: Stocks Tumble on Disappointing Big Tech Earnings
Poorly received quarterly results from Alphabet and Tesla sparked a steep selloff in equities.
By Dan Burrows Last updated
-
Stock Market Today: Mega-Cap Tech Rallies to Drag Markets Higher
Markets focused on upcoming earnings from Magnificent 7 stocks rather than chaos in D.C.
By Dan Burrows Published
-
Stock Market Today: Stocks Tumble After Spectacular Global Internet Crash
Market participants rushed out of risk assets to end a wild week of trading.
By Dan Burrows Published
-
Stock Market Today: Dow Sinks 533 Points as Big Banks, Mega Caps Slump
Goldman Sachs and Apple were two of the worst-performing blue chip stocks on Thursday.
By Karee Venema Published
-
Stock Market Today: Semis Get Slammed and Blue Chips Bounce
The potential for more curbs on tech sales to China set off a rotation into blue chips.
By Dan Burrows Published
-
Stock Market Today: Dow Spikes 742 Points After UnitedHealth Earnings
The S&P 500 and Nasdaq also scored wins Tuesday albeit with much smaller gains than the blue chip Dow.
By Karee Venema Published
-
Stock Market Today: Dow Adds 210 Points as Apple, Goldman Hit New Highs
A big rally in blue chips and some dovish Fed speak boosted the equities market Monday.
By Karee Venema Published