William Blair analyst Matthew Pfau has maintained their neutral stance on NSSC stock, giving a Hold rating on October 26.
Matthew Pfau has given his Hold rating due to a combination of factors related to Napco Security Technologies’ performance. The company’s first quarter results were impressive, surpassing consensus in terms of revenue, adjusted EBITDA, and GAAP EPS. The services revenue in particular exceeded expectations, largely due to the robust sales of fire radios which also contributed to a robust services gross margin of 90% for the quarter. Furthermore, it’s noteworthy that the growth in services revenue ARR indicates that the shortfall in radio sales does not seem to be a result of competition.
Pfau was also encouraged by the strong performance in locking sales, which went up by 24% year-over-year and helped increase the equipment gross margin to 28%, a significant improvement from the previous year. He anticipates that equipment margins will continue to improve in fiscal 2024 as inventory component and transportation cost reductions begin to impact cost of goods sold more significantly. Additionally, Pfau acknowledges the steps taken by the management to establish new procedures around accounting processes, which he believes will be well received by investors. However, Pfau maintains a Hold rating as he waits to see how the management regains investor confidence, taking into account the potential risks of competition and volatility in NAPCO’s results.
In another report released on October 26, B.Riley Financial also maintained a Hold rating on the stock with a $20.00 price target.
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Napco Security Technologies (NSSC) Company Description:
Napco Security Technologies, Inc. engages in the development, manufacture, and distribution of security products. It operates though Domestic and Foreign geographical segments. Its products include access control systems,door security products, intrusion and fire alarm systems, video surveillance products, and cellular communications services. The company was founded in 1969 and is headquartered in Amityville, NY.
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