Shares of Digital Ally (NASDAQ:DGLY) soared over 10% as the company received a buy rating from HCWainwright as the company is well positioned to gain from legislators’ revived focus on transparency and accountability rather than militarization.
Analyst Amit Dayal suggested that recent and unpleasant law enforcement incidents have provided legislators an opportunity to reassess spending priorities, which has generated demand for DGLY’s combined in-car surveillance systems and body worn cameras.
“We believe the market is already shifting in this direction. DGLY’s VuLink system is ideally suited for this, and we expect police departments to opt for solutions that minimize dealings with multiple providers”, said Dayal.
The analyst has set a target price of US$24 for Digital Ally, suggesting that the recent decade’s global security spending trend will continue addressing demand from law enforcement, private, commercial and military sectors.
The regulatory environment supports growth in the sector. The analyst notes that in 2014, the White House proposed a $263M program (needing congressional approval) for various improvements to law enforcement agencies in the various states, of which US$75 million would be used to buy Body Worn Cameras.
Dayal cites a market study by ReportsNReports estimated the size of the smart surveillance and video analytics global market to grow from $13.5B in 2012 to $39B by 2020, a CAGR of 14%. In addition, demand for DGLY’s video recording solutions is also expected to grow beyond law enforcement.
DGLY has earned a dominant position in the ambulance market and Dayal sees revenues from the commercial segment to match or exceed those from law enforcement within the next two years. We believe this market includes over 45,000 ambulances and 200,000 taxi cabs in the US alone.
“Investors should note that the funding would need to be matched by state and local police and could allow the purchase of approximately 50,000 body cameras,” said Dayal, who has projected revenue to grow by 47.7% and 35.4% in 2015 and 2016 to $25 million and $33 million, respectively.