Roth Capital Partners Initiates Digital Ally At Buy, Notes Potential $20 Million Pipeline

Courtesy of Benzinga.

In a report published Thursday, Roth Capital Partners analyst William Gibson initiated coverage of Digital Ally, Inc. (NASDAQ: DGLY) with a Buy rating and $20 price target.

Digital Ally continues to receive attention as government agencies at all levels debate the merits of equipping police officers and law enforcement officials with body worn cameras. The company derives more than 90 percent of its revenue from law enforcement agencies. However, the company faces competition from the much larger and more established TASER International, Inc. (NASDAQ: TASR).

"While the list price for Digital Ally's body camera is higher than Taser, the image quality, battery life, ability to prevent lost detail in high-contrast situations and lower or no monthly fees, we believe total cost of ownership is better for [Digital Ally's] FirstVu HD versus Taser's AXON," Gibson argued in his note.

The analyst also pointed out a key advantage Digital Ally has over its competitor – batteries can be changed in the field instead of shipping the camera back to the company.

Gibson stated that as of the first quarter, Digital Ally sold over 3,000 body cameras and counted more than 725 law enforcement departments testing its products. He noted that this represents a $20 million revenue opportunity for the company.

By comparison, Digital Ally saw its total 2014 revenue total $17.4 million. However, the company spent the year investing in product development which positions itself for growth in 2015 and beyond, according to the analyst.

Looking forward, Gibson is projecting Digital Ally to earn a profit of $2.4 million in the bottom half of 2015 which will make the company cash flow positive, but not enough to avoid reporting a first quarter loss. By 2016, the company is expected to increase its sales to $32.5 million, which will result in $4.2 million of untaxed GAAP, translating to an earnings per share of $0.80.

The analyst concluded that he applied a 25x multiple to his 2016 earnings per share estimate to derive his $20 price target.

Posted-In: Axon Body Worn Cameras FirstVu HD police departments ROTH Capital PartnersAnalyst Color Initiation Analyst Ratings