On Tuesday, BMO Capital Markets adjusted its outlook on shares of Telos Corporation (NASDAQ:TLS), a cybersecurity company, by reducing the price target to $3 from the previous $4. The firm has maintained its Market Perform rating on the stock. The adjustment follows Telos's recent financial performance, which surpassed expectations in Secure Networks and showed better-than-anticipated adjusted EBITDA margins.
The analyst from BMO Capital expressed optimism about the growth of TSA PreCheck locations, anticipating that this expansion could positively impact Telos's revenues in the fiscal year 2025. Despite the positive quarter, the guidance for the second half of the fiscal year 2024 was significantly lower than both BMO Capital's and the consensus estimates. This downward revision is attributed to extended protests and delays in securing large contracts.
The uncertainty regarding the long-term revenue and profit trajectory for Telos was cited as a reason for the lowered price target. Although the quarter's results were strong, the future financial outlook for the company remains unclear, leading to a cautious stance from BMO Capital.
In the statement, the analyst highlighted the potential for the TSA PreCheck program to aid in revenue growth. However, the concerns about the second half of the fiscal year 2024 overshadowed this optimism. The revised guidance reflects challenges that the company is facing, which include the impact of protests and contract deferrals.
BMO Capital's revised price target of $3 reflects the firm's current assessment of Telos's value, considering both the recent financial performance and the challenges anticipated in the near future. The Market Perform rating indicates that the firm does not foresee significant stock movement for Telos in either direction at this time.
In other recent news, Telos Corporation has reported surpassing its Q2 2024 financial forecasts. The cybersecurity firm recorded revenues of $28.5 million, exceeding its expected range of $25 million to $28 million. This growth was primarily driven by their Security Solutions and Secure Networks segments, contributing $17.9 million and $10.6 million, respectively. The company also reported a higher-than-expected GAAP gross margin of 34.1%, topping the guidance of 30% to 33.3%.
Despite facing protests on two program awards, Telos provided a third-quarter revenue guidance of $22 million to $24 million and anticipates an adjusted EBITDA loss between $8 million and $6.5 million. These are some of the recent developments for the company.
Telos has nearly tripled its TSA PreCheck enrollment center footprint since the last earnings call and plans to expand it to 500 by 2025. The company's strategy involves capturing a significant share of the $200 million TSA PreCheck market. CEO John Wood expressed confidence in the company's future growth through new business awards and pipeline expansion.
InvestingPro Insights
Following BMO Capital Markets' recent outlook adjustment on Telos Corporation, InvestingPro data and tips provide a more granular perspective on the company's financial health and stock performance. Telos holds a market capitalization of approximately $189.67 million, reflecting its current valuation in the market. Despite challenges, the company maintains a strong liquidity position, as it holds more cash than debt on its balance sheet, which is a positive sign for investors considering the stock's fundamentals.
However, analysts have expressed concerns, with four analysts revising their earnings downwards for the upcoming period, and anticipating a sales decline in the current year. This aligns with BMO Capital's cautious stance towards Telos's second-half guidance for fiscal year 2024. Moreover, the company's stock has experienced significant volatility, with a price total return of -31.99% over the last week and -35.19% over the last month, highlighting the high-risk nature of the investment.
For investors looking for a deeper dive into Telos's performance and outlook, there are additional InvestingPro Tips available, providing insights that range from analysts' expectations to the company's profitability forecast. For instance, it's noted that analysts do not anticipate the company will be profitable this year, and the stock has fared poorly over the last six months, which could be crucial for those considering the long-term potential of their investments.
To explore these insights and more, visit the InvestingPro platform for a comprehensive analysis of Telos Corporation, including a total of 11 InvestingPro Tips that could help in making a more informed investment decision.
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