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Should Digital Ally Worry About Axon's Body Camera Plans?
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In an unprecedented move, Axon Enterprise Inc. announced a program under which it will offer every police officer in the U.S. a one-year free trial of all its existing body camera products, full software suite and training support.
The offering includes Axon Body 2 camera and Evidence.com "Unlimited Pro" license, and docking station to securely upload footage.
The company changed its name from TASER International, Inc. (TASR) to Axon Enterprise, effective today.
Presently, Axon is the leading dealer of body cameras in the U.S., and is way ahead of smaller competitors like Seattle-based VieVu and Digital Ally, Inc. (DGLY - Free Report) . With this unconventional move, the company hopes to convert a number of trials into contracts, accelerate the market forward and ramp up revenues.
If the strategy is as successful as the company expects it to be, Axon could quickly crowd out its competitors completely.
Lawsuits are a common nuisance in the law enforcement body camera business and Axon has been involved in a couple of high-profile ones. In 2016, Digital Ally filed a suit against Axon, alleging that the latter’s camera systems for law enforcement infringe on its patented technology.
In an ongoing lawsuit, Digital Ally claims that its patented auto-activation technology, used in body cameras of law enforcement customers has been infringed by Axon. Digital Ally’s revenues have been hurt in the recent fourth quarter and full-year 2016 results, and the company blames Axon’s misleading statements about its patents for the same.
Digital Ally also accused Axon of engaging in improper, unethical and unfair competitive practices. Axon simply called the lawsuit frivolous.
WestPark Capital analyst, Ishfaque Faruk, hypothesized that even if Digital Ally won the patent infringement lawsuit, Axon would either buy the smaller company or license its technology. Most likely, neither outcome would have a significant impact on Axon.
So in any case, we believe that Digital Ally is exposed to substantial risk, particularly if Axon’s strategy succeeds in expanding its market share.
In light of the above risks, we have a Zacks Rank #4 (Sell) for Digital Ally. The company’s shares have had a tough run over the past one year, having declined 5.8% relative to the Zacks classified Protection Safety Equipment and Services industry’s average positive return of 17.1%.
On the other hand, Axon’s shares appreciated 17.7% over the same time, outperforming the industry by a slight margin, as you can see in the chart below. The stock’s performance is in line with that of Alarm.com Holdings, Inc. (ALRM - Free Report) and Ituran Location And Control Ltd. (ITRN - Free Report) , which also surpassed the industry mark. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Analysts also seem to have turned bullish on Axon in recent times, as the Zacks Rank #3 (Hold) company’s earnings estimates moved north over the past couple of months. The Zacks Consensus Estimate for 2017 increased 5.3% to 40 cents in the last 60 days.
Conversely, Digital Ally seemingly holds no favor with analysts lately, as the company’s loss estimates widened substantially over the past month, which makes its outlook even bleaker. With one downward revision compared with none upward in the past 30 days, the Zacks Consensus Estimate for 2017 widened from a loss of 29 cents a month ago to a loss of 80 cents today.
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Should Digital Ally Worry About Axon's Body Camera Plans?
In an unprecedented move, Axon Enterprise Inc. announced a program under which it will offer every police officer in the U.S. a one-year free trial of all its existing body camera products, full software suite and training support.
The offering includes Axon Body 2 camera and Evidence.com "Unlimited Pro" license, and docking station to securely upload footage.
The company changed its name from TASER International, Inc. (TASR) to Axon Enterprise, effective today.
Presently, Axon is the leading dealer of body cameras in the U.S., and is way ahead of smaller competitors like Seattle-based VieVu and Digital Ally, Inc. (DGLY - Free Report) . With this unconventional move, the company hopes to convert a number of trials into contracts, accelerate the market forward and ramp up revenues.
If the strategy is as successful as the company expects it to be, Axon could quickly crowd out its competitors completely.
Lawsuits are a common nuisance in the law enforcement body camera business and Axon has been involved in a couple of high-profile ones. In 2016, Digital Ally filed a suit against Axon, alleging that the latter’s camera systems for law enforcement infringe on its patented technology.
In an ongoing lawsuit, Digital Ally claims that its patented auto-activation technology, used in body cameras of law enforcement customers has been infringed by Axon. Digital Ally’s revenues have been hurt in the recent fourth quarter and full-year 2016 results, and the company blames Axon’s misleading statements about its patents for the same.
Digital Ally also accused Axon of engaging in improper, unethical and unfair competitive practices. Axon simply called the lawsuit frivolous.
WestPark Capital analyst, Ishfaque Faruk, hypothesized that even if Digital Ally won the patent infringement lawsuit, Axon would either buy the smaller company or license its technology. Most likely, neither outcome would have a significant impact on Axon.
So in any case, we believe that Digital Ally is exposed to substantial risk, particularly if Axon’s strategy succeeds in expanding its market share.
In light of the above risks, we have a Zacks Rank #4 (Sell) for Digital Ally. The company’s shares have had a tough run over the past one year, having declined 5.8% relative to the Zacks classified Protection Safety Equipment and Services industry’s average positive return of 17.1%.
On the other hand, Axon’s shares appreciated 17.7% over the same time, outperforming the industry by a slight margin, as you can see in the chart below. The stock’s performance is in line with that of Alarm.com Holdings, Inc. (ALRM - Free Report) and Ituran Location And Control Ltd. (ITRN - Free Report) , which also surpassed the industry mark. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Analysts also seem to have turned bullish on Axon in recent times, as the Zacks Rank #3 (Hold) company’s earnings estimates moved north over the past couple of months. The Zacks Consensus Estimate for 2017 increased 5.3% to 40 cents in the last 60 days.
Conversely, Digital Ally seemingly holds no favor with analysts lately, as the company’s loss estimates widened substantially over the past month, which makes its outlook even bleaker. With one downward revision compared with none upward in the past 30 days, the Zacks Consensus Estimate for 2017 widened from a loss of 29 cents a month ago to a loss of 80 cents today.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>