Taser International is best known for its electroshock
weapons, and for good reason -- they account for about 90% of the
But much of the attention from Wall Street lately has focused
on whatTaser (
) calls on-officer video technology.
This technology lets law enforcement officers wear gear
equipped with video cameras to record arrests and other
The idea is to protect officers from unsubstantiated claims of
abuse or harassment while helping ensure that officers conduct
themselves in a professional manner.
Products in Taser's on-officer video unit include the Axon
Body, a small video camera that can be mounted on an officer's
shirt, belt and windshield; the Axon Flex, a video camera the
size of a penlight that is mounted to the temple of a pair of
eyeglasses; and the Taser Cam, a handheld video camera.
Video products are in the early stages of adoption. They are
considered an enormous growth opportunity for Taser, which relies
on sales of conducted electrical weapons, or CEWs, to law
enforcement, military, prison, private security and personal
New Products Popular
Taser didn't even launch its Axon Body line until this year's
third quarter, and wound up selling nearly 780 units, CEO Patrick
Smith said on a conference call with analysts. "By launching this
product we are filling a much desired market niche," he said.
Another technology Taser has been promoting is its cloud-based
Evidence.com digital evidence management system. This lets
customers manage, share, analyze and store video and other
In addition, Taser has revamped its pricing structure for its
products to make them accessible to more customers. The price for
Axon Flex has been cut nearly in half, to $499 per camera from
$949. Licenses for Evidence.com range from as low as $9.95 a
month to $49 a month, depending on the specific services.
One goal of the new pricing model is to accelerate the sales
process "by eliminating the perception that our products or
services are expensive," Smith said.
Taser has big plans for these products, with the ultimate goal
of equipping all law enforcement officers with on-officer video
within three years.
The gear certainly fills a need for police departments, notes
Dougherty & Co. analyst Gregory McKinley.
"The challenge for product adoption will be the readiness of
police departments and officers to adopt new and innovative
technology in the field," McKinley said. "Axon Flex and Axon Body
will be sold modestly above cost to drive adoption, with the view
for profit generation over time accomplished by attaching an
Evidence.com license to the device sale."
Law enforcement agencies that ordered Axon and Evidence.com
products during the third quarter included the Dallas/Fort Worth
International Airport Department of Public Safety and the police
departments of Fort Worth; Greensboro, N.C.; Spokane, Wash.;
Topeka, Kan.; and Albuquerque, N.M.
Excitement over the potential of Taser's Axon and Evidence.com
products has driven growth in share price. The stock has climbed
more than 80% since Aug. 13, which was a day after a key court
decision on policing and a day before the company announced
several new deployments for its cameras and Evidence.com
Taser stock established a six-year high of 18.52 on Oct. 31,
and shares currently trade near 16.
The company's rise in the stock market is viewed as partly due
to a U.S. federal court decision Aug. 12 that said the New York
Police Department's stop-and-frisk policy is
As part of that decision, Judge Shira Scheindlin ordered the
NYPD to enter a one-year pilot program outfitting some of its
officers with wearable cameras. The ruling was considered a bonus
for Taser because it is the No. 1 player in the market for
Although the ruling is under appeal, the cameras are becoming
more popular with police forces.
In a Dec. 16 note, JPMorgan analyst Paul Coster cited the
video business as one of the reasons he upgraded Taser to
overweight from neutral.
"The multiple is a premium to our coverage universe that is
justified, in our view, by the company's long-term earnings
growth potential, particularly the video segment," he said.
Meanwhile, Taser has shown recent promise on the international
front. On Dec. 10, the company announced $5.8 million worth of
foreign orders for its CEWs and its next generation Smart
Most of Taser's foreign orders came from the Middle East and
Asia. "The political turbulence in these regions has increased
the concern for personal safety," Zacks Equity Research said in a
report. "Taser's unique technology will help lower the
possibility of injuries and save civilian lives."
The $5.8 million in orders is pretty significant for a company
that posted $35.2 million in sales during the third quarter. That
figure was up 22% from a year earlier, marking the seventh
straight quarter of double-digit revenue growth.
Earnings for the quarter climbed 43% to 10 cents a share,
topping views for 8 cents.
Sales in the Taser weapons segment grew 16.8% to $31.6
million, while Evidence.com and video product revenue more than
doubled to $3.6 million.
"Taser delivered a strong quarter and 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," analyst
Analysts expect fourth-quarter earnings to come in flat at 7
cents a share. Full-year profit is seen rising 19% in 2013 and 6%
Taser is the 10th largest firm by market capitalization in
IBD's Security/Safety industry group, led in size byADT (
),Corrections Corp. of America (
) andGeo Group (
). The industry group ranks No. 46 of 197 that IBD tracks.