Ladenburg: 'Not Enough Upside' For Taser

Taser International, Inc. TASR, faced with explosive demand from law enforcement for its body mounted cameras, could face a keystone cops scenario that poses risks to smooth growth.

"Many of these agencies have antiquated systems," Ladenburg's Glenn G. Mattson said in a research note Monday. "Taser may have to spend more than it expects to make sure they get the implementation correct."

Mattson downgraded the company to Neutral, from Buy, citing Taser's 58 percent gain since early September. Shares closed Monday at $23.32, down 6 percent.

"There isn't enough upside to justify putting new money to work," Mattson said.

Shares got a boost from President Barack Obama's December 1 proposal to allocate $75 million of federal funding for a 50 percent matching program to help local agencies acquire body mounted cameras.

Last month the Los Angeles Police Department chose Taser as its camera provider for the agency following tests against privately held Coban Technologies and Vievu. The New York City Police Department and the London Metro Police are currently performing similar tests.

Along with growing acceptance of its camera system comes the adoption of Taser's subscription-based Evidence.com, a cloud-based system for storing video and other information.

Mattson called the system the key to Taser's "ability to monetize the on-officer video movement" with recurring revenue from locked-in customers.

The service will carry high gross margins, once greater scale is achieved, Mattson said.

Mattson increased his forecast of Taser police cameras in use by the fourth quarter of 2016 to 110,000, from 70,000. Currently, there about 20,000 body mounted Taser cameras are in use by law enforcement agencies.