On Wednesday, Telos Corp . (NASDAQ:TLS) received an updated stock price target from DA Davidson, with the firm increasing it to $3.50 from the previous $2.50 while maintaining a Neutral rating on the stock. This adjustment reflects Telos' stronger-than-anticipated performance in the third quarter, particularly in terms of EBITDA, and a promising forecast for the fourth quarter.
According to the analyst's remarks, Telos' Q3 results surpassed expectations, and the company's revenue from the Transportation Security Administration (TSA) is growing.
Moreover, one of two new major programs expected to contribute approximately $60-85 million in revenue in calendar year 2025 (CY25) has begun generating income. Management's shared outlook suggests a potential for over $150 million in revenue for CY25, indicating a growth of more than 40%.
The analyst also noted that Telos has announced a restructuring plan that is likely to bring the business to a slightly positive EBITDA by CY25. Despite the positive developments, the firm's stance remains cautious due to the company's history. The analyst stated that they need to see more progress before becoming more optimistic about the company's prospects.
Telos Corp., which specializes in cybersecurity, cloud security, and enterprise security solutions, appears to be on track for significant growth in the coming years. The company's recent performance and forward-looking guidance have been instrumental in DA Davidson's decision to raise the price target. However, the Neutral rating suggests that the firm is waiting for further evidence of sustained performance before changing its stance on the stock.
In other recent news, Telos Corporation has seen encouraging developments. The cybersecurity solutions provider reported Q3 revenue of $23.8 million, exceeding expectations, largely driven by their TSA PreCheck program which contributed 77% to the total revenue. Despite a significant charge in Q3, Telos managed to improve its adjusted gross margin and reported a smaller adjusted EBITDA loss than anticipated.
BMO Capital Markets has raised its price target for Telos from $3.00 to $4.50, maintaining a Market Perform rating. This adjustment reflects the analyst's recognition of the company's potential amidst ongoing restructuring and the expected expansion of its Transportation Security Administration (TSA) business.
Looking forward, Telos projects a revenue growth in Q4, with estimates ranging from $24.5 million to $26.5 million. By 2025, the company aims to establish 500 TSA PreCheck enrollment locations and expects substantial annual revenue growth, supported by a robust business pipeline valued at approximately $4.1 billion. Despite projecting an adjusted EBITDA loss for Q4, Telos is optimistic about generating positive free cash flow as contracts mature.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Telos Corp.'s financial position and market performance. Despite the company's promising outlook for 2025, InvestingPro Tips indicate that Telos is not currently profitable and analysts do not anticipate profitability this year. This aligns with the cautious stance taken by DA Davidson in their analysis.
However, it's worth noting that Telos holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. This financial stability could provide the company with the flexibility needed to execute its growth plans and restructuring efforts.
In terms of market performance, Telos has shown strong returns over the last three months, with a price total return of 60.99% according to InvestingPro Data. This significant uptick may reflect growing investor confidence in the company's turnaround strategy and future prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 9 additional tips for Telos Corp., providing a deeper understanding of the company's financial health and market position.
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