Why Taser Is Gaining Momentum

 |  About: TASER International, Inc. (TASR)
by: George Chadwick

For a company with so much bluster (hype) about 8 years ago, we were almost loathe to cover this one, let alone invest in it. With all the trappings of a trading vehicle, be prepared for a near-term ceiling. Nevertheless, the last ceiling provided a good triple or better on your money about 3 years ago.

So, worst case scenario, this formerly shilly-shally stock goes back below 5 yet again. The longer term technical picture as an underperformer has been eclipsed recently by a stair-stepping progression that forms one bull flag and another potential bull flag is in the making with a recently rising 200 day moving average, a technical sign of momentum.

As far as fundamental momentum is concerned, analysts think that Taser's (NASDAQ:TASR) outlook only gets better from here. They see a 13% gain in revenue and net income of $0.10 a share this year. By 2011, the top line should accelerate to 22% growth, with profits nearly tripling to $0.28 a share.

A new venture for them, Evidence.com, may provide a potential new revenue stream. It could potentially save police force resources and improve intra- and inter-departmental collaboration and efficiency, and there is the prospect for improved collaboration with prosecutors.

Taser electroshock stun gun use has had some setbacks and legal challenges in recent years, but in the end, stun guns do provide a more forgiving policing alternative to conventional firearms. When compared to bullets, the lethality of a Taser can not be compared. Autopsy reports have tended to show that a tased victim who dies often has a pre-existing heart condition and/or is on illicit drugs.

It does seem ironic that the police have been sued for using a less lethal approach. Hence, Evidence.com seems like an excellent fit because it helps provide on-the-scene rationale and justification for tasing suspects, with an audio-visual record from the officer’s perspective. This is much more powerful in front of a jury than a regular police report.

Orders for Taser guns continue to come in on both the institutional and consumer side. Some recent news confirms this, such as the Chicago police department expanding the use of Tasers on March 11, 2010, and on March 8, 2010 the first U.S. order came in for the Axon system which works seamlessly with Evidence.com, and on February 19, 2010 New Zealand became the first national police force to announce they were to standardize on the Evidence.com system.

The stock is up 73% so far this year, even though its catalysts are seen as arriving later in the year. Taser has outperformed since reporting strong fourth-quarter results (see earnings call transcript here) and as awareness of its new products has grown. But it could take one or two quarters before we see contracts for Axon and Evidence.com to validate this projection.

Taser could potentially save police force resources and improve intra- and inter-departmental collaboration and efficiency, and there is the prospect for improved collaboration with prosecutors.

Shareholder equity is as follows: Shares Outstanding 62.0 Million, Institutional Ownership 34.92%, Number of Floating Shares 59.1 Million, Short Interest as % of Float 6.91%. 194 institutions own 34.9% of the 0.06 billion common shares outstanding. This is higher than the average institutional ownership of the Electronic Instruments & Controls Industry at 28.7%, and lower than the average of the S&P 500 as a whole which is 68.2%.

The AXON System is an integrated audiovisual recording device comprised of a headcam, communications hub and tactical computer worn by the officer. Audiovisual evidence acquired by AXON is then transferred to EVIDENCE.COM, a cloud-based data repository, using SYNAPSE ETM. Altogether they provide a seamless, highly secure and efficient process for gathering and managing high-quality evidence, allowing law and legal professionals to access data quickly and easily without compromising its integrity. The System also makes collaboration and coordination feasible, further increasing the value of the evidence. Learn more at EVIDENCE.COM. Also, see the video presentation at the link here.

TASER International, Inc. develops and manufactures advanced electronic control devices (ECDs) designed for use in the law enforcement, military, corrections, private security and personal defense markets. The Company makes ECDs for two main types of market segments: the law enforcement, military, corrections and professional security markets, and the consumer market. Its products use a replaceable cartridge containing compressed nitrogen to deploy and propel two small probes that are attached to the ECD by insulated conductive wires with lengths ranging from 15 to 35 feet. The Company's ECDs transmit electrical pulses along the wires and into the body affecting the sensory and motor functions of the peripheral nervous system. The energy can penetrate up to two cumulative inches of clothing, or one inch per probe. The initial effect lasts five seconds for its law enforcement, military and corrections products and up to thirty seconds for its consumer market models.

Disclosure: Long TASR