JPMorgan Goes Long Taser, Says Stock Could Rise 50% On Sum-Of-Parts Valuation

• Shares of TASER International, Inc. TASR have declined 47.65 percent over the past six months, falling almost down to their 52 week low on November 17.
• J.P. Morgan’s Mark Strouse has reinitiated coverage of the company with an Overweight rating and price target of $25.
• Strouse believes that the risk-reward profile of the stock is now favorable and new contract wins could prove to be potential catalysts for the stock.

Analyst Mark Strouse mentioned that the stock had declined 47 percent from its June 2015 high, primarily driven by investor concerns regarding increased investment activity, E.com pricing and new competition.

Although risks still remain, especially in the nascent video market, Strouse believes that these risks are well known and already priced into the stock.

About 80 percent of Taser’s revenue comes from its core weapons business, which according to Strouse “commands a dominant market share of the law enforcement market.”

Although revenue growth is expected to moderate in this segment, stable operating margins and cash flow, along with solid balance sheet, are expected to offer sufficient sources of investment in the video business, as well as for international expansion.

The video business is expected to drive long term growth, with the Axon/Evidence.com business have increased from 5 percent of the total revenue in FY12 to 20 percent in FY15.

“We think TASR’s uniquely strong position in a large addressable market, solid growth momentum and improving business model justify a premium multiple and we would add to positions, particularly on pullbacks,” Strouse added.