How Taser's Growth Is 'Coming At A Cost'

Taser just reported a mixed bag of Q3 numbers, and Oppenheimer analyst Andrew Uerkwitz wasn’t particularly impressed. In a new report, Uerkwitz discussed where Taser is likely to go from here.

The Numbers

Taser reported sales of $50.4 million for the quarter, beating consensus estimates of $47.0 million. However, EPS came in at $0.03, five cents below Wall Street’s expectations. Uerkwitz noted that elevated OpEx and higher-than-expected tax charges were the main reasons for the Q3 earnings shortfall.

Weapons Performance

Non-consumer weapon shipments declined 14 percent quarter-over-quarter (Q/Q) and 22 percent year-over-year (Y/Y), but a mix shift toward higher-priced smart weapons made up the difference. Weapon gross margins declined 1.7 percent Y/Y.

Guidance Changes

Management’s Q4 revenue guidance is in-line with Q3. The company expects near-term gross margins in the 60–64 percent range. Oppenheimer has lowered its 2015/2016 EPS forecast from $0.43/$0.48 to $0.31/$0.34 based on new margin expectations and elevated OpEx projections.

Outlook

Uerkwitz believes that management seems happy to sacrifice short-term profitability in the name of longer-term market share gains. “Many of our initial fears surrounding the length of camera roll-outs and active vs. non-active EV.com seats are now being reflected in TASR’s quarterly metrics,” he added.

Uerkwitz sees the next six to nine months as “critical” for Taser and expects that the company will face a difficult environment of tough comps and growing competition. Oppenheimer maintains its Perform rating on the stock.

Disclosure: The author holds no position in the stocks mentioned.