ShotSpotter (SSTI) is a Zacks Rank #5 (Strong Sell) that provides precision-policing and security solutions for law enforcement and security personnel. Its technology involves a gunshot detection system that helps law enforcement identify, locate, and deter gun violence.

The stock has struggled since July of last year, losing about half its value since. Investors are on the ropes and questioning whether to double down or cut and run.

Recent earnings have not helped the bulls. The stock is now probing 2019 lows as the company sees more earnings estimates revisions to the downside.

About the Company

ShotSpotter is headquartered in Fremont, CA and employs 167 people. The company was founded in 1996 and operates in the United States, Bahamas and South Africa. ShotSpotter sells its solutions through its direct sales teams.

SSTI is valued at $325 million, which has been cut in half since last summer. The company holds a Zacks Style Score of “A” in Growth and Momentum, but “F” in Value. With earnings coming in below market expectations, the stock is falling on valuation questions.  

Q4 Earnings

In late February, SSTI reported a both an EPS and revenue miss. On a positive note, the company did raise its FY22 revenue guidance to $81-83M v the $71.4M expected.

The stock shot higher on the guide, which helped it bounce well off the 2022 lows. However, the stock has slowly given away half its gains.

ShotSpotter Price and EPS Surprise

ShotSpotter price-eps-surprise | ShotSpotter Quote

One reason for the lack of follow trough, was year over year margins were lower. This was because of lower gross margins from LEEDS, which the company sees improving next year.

Another reason the stock stalling is that estimates are falling for the current year.

Estimates

Because of the positive guide, the current quarter has seen estimates tick higher. Over the last 60 days, numbers have been revised higher to $0.04 from $0.02.

However, as we look into the rest of 2022, numbers are going lower over the same time frame.

For next quarter, we see an expected $0.04 drop to a negative $0.04. For next year, we see a fromer $0.17 estiamte, that has been lowered to negative $0.03. So in both cases, analysts estimates have been lowered to reflect negative earnings.

The EPS miss was the third straight and the downside surprise continues to get bigger, with the last quarter a -1300% miss.

After earnings, we did see Roth Capital reiterate its Buy rating, but they dropped the price target to $50 from $60.

Technical Take

Looking at the chart, we see a serious bleed over the last ten months. Since the July high of $51.50, the stock fell by over 56% to the low of $22.63. The stock saw a nice bounce to $30, but is starting to creep lower once more.

The stock is now trading below its 50-day moving average after a couple weeks above that level at $27. This is a bearish sign and the bulls will want to hold the $25.70 area, which is the 61.8% retrace from recent lows to highs. If this level fails, look for new 2022 lows and possibly a move down to $18.

In Summary

ShotSpotter has a solid mission and has been a great stock until recently. Investors need to consider that the growth might not be what the market is looking for right now.

It might be time to accept that the valuation will get in the way of a higher stock price.

For now, a better option in the technology services space might be Blucora (BCOR Quick QuoteBCOR - Free Report) . The stock is a Zacks Rank #1 (Strong Buy) and the company is coming off a 43% EPS beat just over a month ago.