It's no shock that stun gun manufacturer Taser International's stock has been on the rise during the past several months.
This summer, the Scottsdale-based company introduced its new X26 weapon and bought out its competitor, Taser Technologies. It also ended its second quarter with revenue up 23 percent year over year, and announced the company is on track to end the year with a 60 percent year-over-year revenue increase.
And fortunes are continuing to shine on Taser. Earlier this month, the company wowed institutional investors at a Roth Capital Partners conference in New York City, while third-quarter earnings are anticipated to be better than analysts' predictions.
And last week, Taser announced that the Chicago Police Department has purchased 200 of its weapons for more than $150,000.
“I think the growth is continuing for us because of the success we're having with law enforcement talking to other law enforcement,” said Tom Smith, Taser's president and co-founder.
“They're out there looking at what each agency is using, and now with the emphasis on homeland security and some of the other security issues as far as trying to stop people without having to kill them, our product has jumped to the front and is the leader in that category.”
About 99 percent of the company's business is law enforcement and military, while domestic airlines and retail have taken a back seat for the time being, he said.
“As far as the airlines go, in the United States we still have a major blockage at the Transportation Security Administration not allowing airlines to put these on the aircraft,” Smith said. “Overseas I'm having a tremendous acceptance. I have two carriers that have it on board now, and by the end of the year I believe I'll have at least another two.”
As for retail sales, it's not the right time yet for a rollout because consumers “want to see more officers using it, and it’s still kind of a funky technology, so people have to get used to using it before it will be something they will accept as the norm,” he said.
Regardless, Taser is seeing continued increases in domestic and overseas business, Smith said.
“It's being used now in the United Kingdom, in Germany, Switzerland, even in the Asia Pacific region, in Korea and Thailand, and some other places where they're in testing and evaluation phases,” he said. “The time is right for that type of product.”
There's a lot of volatility in Taser's stock, which is traded on the Nasdaq stock market, because its float is only 1.8 million outstanding shares, said Steven Gish, a senior research analyst at Roth Capital Partners. Most shares have been owned by company insiders and individuals, not institutional investors, he said.
“What investors are focusing on is, after struggling for a couple of years and having some relatively low revenue numbers, they had $6.8 million in revenue in 2001, and they jumped to $9.8 million in 2002,” he said. “We're projecting $15.5 million for this year.”
The Chicago police order is significant in that it could lead to more sales to that department, as well as orders from other major metropolitan police forces, such as the New York and Los Angeles police departments, Gish said.
“They don't have contracts with the NYPD or LAPD, however. Taser Technologies did sell product to the LAPD, so I think at some point it's reasonable that Taser International will sell to that department,” he said.
The company's “bread and butter” has been its sales to more than 100 smaller police departments across the country, said Steve Tuttle, Taser's director of government and law enforcement affairs.
The Maricopa County Attorney's Office has reported that Mesa police officers have had problems with Taser's stun guns. Tuttle calls it an “isolated case.”
“There are limitations of the device,” he said. “You have to hit the target. It can occur, it does, but fortunately, the 94.4 percent field success rate is unmatched by any other, less lethal weapon.” Right now the company can't make its X26 guns fast enough to fill orders, Tuttle said. It will be moving to a new, larger headquarters building in mid-2004, he said. That will allow for an increase in employees and production volume, he said.
The company now has about 72 employees.
“There's a lot of opportunity for this company to grow the business going forward,” Gish said. “I think that's what's driving the stock price.”
The company will be reporting its third-quarter financial results Oct. 21, and “it's going to be better than we thought,” Smith said.
“The third quarter has always been our slowest quarter historically, but this year we're just seeing the continued growth that we've experienced in the first two quarters,” he said.