TASER: Capitalize on Our Future Police State

Taser Stock TASR

(NASDAQ: TASR) Beyond Taser’s infamous stun guns (which still sport double digit growth rates), the Axon body camera could provide this small cap company with one of the greatest growth stories over the next three years.

The idea of equipping police officers with body cameras became a national issue after Michael Brown was shot in Ferguson earlier this year. President Obama immediately endorsed this proposition and the White House approved $263M to match 50% of camera purchases by local police forces over the next three years.

At a cost of a few hundreds dollars, initial camera purchases aren’t very exciting. What is of particular interest to me is the reoccurring service revenue stream collected every month to provide unlimited storage of the HD video officers collect.

Taser charge’s $79/month for this service, per camera. The margins on video storage are in excess of 60% with triple digit growth. The camera/service segment of TASR’s revenue is now about 25% of their business.

The top police departments in the country (NYC, LA, Chicago) have all started pilot programs for wearable cameras and plan on equipping the majority of their force in the near future. Beyond the US, London is also in talks to purchase 20k Axon’s from TASR.The wearable camera will inevitably be standard police equipment around the world.

The only significant competition for TASR is Vievu, which plans on going public next year. From my research on police blogs, officers seem to prefer the Axon camera over Vievu.

TASR has the opportunity to grow EPS by over 30%/yr over the next few years and right now I believe the company’s intrinsic value is easily $30/share.

Despite being down as much as 15% this morning on a missed EPS number, TASR has confirmed my thesis that the potential market for their cameras is enormous. According to their CEO the total available market is ~$3B annually. The reason for the EPS miss seems to be the uptick in R&D spending, which will ensure they retain position as the market leader.

I added to the position I’ve been holding for a few weeks this morning around $20.50. Currently the stock is reading oversold on technicals, and has a tendency to bounce off such levels.

PS. One of my other favorite stocks at the moment is AMBA, they supply the video technology in the Axon Camera