VTSI upgraded to strong buy

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Analyst : Lake Street

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Lake Street’s Jaeson Schmidt raised their price target on Virtra (NASDAQ: VTSI) by 23.1% from $13 to $16 on 2024/05/15. The analyst maintained their Strong Buy rating on the stock.

Schmidt’s update followed an assessment of Virtra’s 2024/05/14-dated Q1 2024 earnings report and participation in the earnings call.

Although “disappointed by the softer results,” the analyst argued that the company’s story and growth possibilities remain unchanged.

Schmidt sees the post-earnings selloff as an excellent opportunity to buy Virtra shares because, in the long run, they think the company can grow its sales by double digits.

Earnings Report

For Q1 2024, Virtra reported:

EPS of $0.11, which missed the consensus estimate of $0.12 and, by 59.3%, Q1 2023’s $0.27.
Revenue of $8.09M, which missed the consensus estimate of $8.56M and, by 19%, Q1 2023’s $10M.
EBITDA of $1.9M, down 52.5% Y/Y.

Management did not provide financial guidance in its press release or earnings call.

CEO John Givens commented: “Q1 2024, while showing a dip in revenue, marked another period of strategic execution as we continue to build on the transformative groundwork laid over the past two years.

“The anticipated revenue fluctuation was primarily due to the cyclical nature of budget allocations, often skewed towards year-end, coupled with the impact of the U.S. government’s continuing resolution, and the completion of a large portion of our capital backlog in 2023.

“We remain optimistic that the integration of new sales strategies and team members will begin to influence our financial results as the year progresses, especially as these initiatives mature and the U.S. government budget resolutions advance, catalyzing purchasing decisions.

“Our operational enhancements, including our consolidation into a single state-of-the-art production facility and implementing an upgraded ERP system, have been pivotal in elevating our operational excellence.

“These improvements have enabled more efficient production, higher quality outputs, and quicker delivery times, thereby enhancing customer satisfaction.

“Additionally, the Microsoft IVAS contract has propelled our research and development efforts in the military market, advancing our technology and providing insights that aid in deeper market penetration both domestically and abroad.

“As our strategic initiatives continue to take root throughout 2024, we are well-positioned to capitalize on the opportunities presented by our upcoming technology introductions and growing content library.”

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Definitions

Annualized Return: The rate at which an investment grows each year over the period to arrive at the final valuation.

Bear Market: A decline of at least 20% from the market’s high point to its low.

Beta: A measure of how an individual asset moves when the overall stock market increases or decreases.

Correlation: A measure of the extent to which two variables are related.

Dividend Yield: The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share. It is also a company’s total annual dividend payments divided by its market capitalization, assuming the number of shares is constant.

Developed Markets: A country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of market institutions.

Emerging Markets: A country that has some characteristics of a developed market but does not fully meet its standards. This includes markets that may become developed markets in the future or were in the past.

Growth Factor Stocks: Growth stocks are companies expected to grow sales and earnings at a faster rate than the market average.

Large Cap Stocks: Shares of publicly traded corporations with a market capitalization of $10 billion or more.

LTM: An acronym for “Last Twelve Months” or the past one year.

NTM: An acronym for “Next Twelve Months” or the next one year.

Price Return: The rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, not including income generated in the form of interest or dividends.

Total Return: Return on a portfolio of investments including capital appreciation and income received on the portfolio.

Small Cap Stocks: Small-cap stocks are shares of companies with a market capitalization of less than $2 billion.

Standard Deviation: In statistics, the standard deviation is a measure of the amount of variation or dispersion of a set of values. A low standard deviation indicates the values tend to be close to the historical average of the data set, while a high standard deviation indicates the current value is outside of the historical average range.

Value Factor Stocks: Stocks that are inexpensive relative to the broad market based on measures of fundamental value (e.g., price to earnings or price to book).

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