Digital Ally, the “GoPro for cops” which markets video surveillance for law enforcement, has received approval on its VuLink patent and has begun shipping the new product. VuLink is the first product on the market that enables a body camera on the police and in-car video system to be activated simultaneously. Digital Ally is trying to create an integrative system for law enforcement. DGLY stock is up a staggering 150% on this news.
Though today’s press release is a step forward for Digital Ally, the announcement does not warrant a 150% increase in price. Overall, the company is still in the same financial position it was in yesterday with growth continuing to be an issue.
Share Structure Brings Volatility
Digital Ally is a low float company as it has approximately 2.3M shares outstanding and only about 1.45M actively traded. So far today, the company has traded 4M shares in volume. This means that all actively traded company shares have been exchanged almost 3x. In other words, traders have been bidding the stock price up. Once this settles, I believe the price will fall.
Stuck in Growth Rut
The company has seen little (even negative) growth in the last couple of years. In 2012, revenues were $17.6M. This number rose to $17.8M for 2013. Q1 2014 saw a 16% decline in the top line from Q1 2013 and no growth from the same period in 2012. Digital Ally hopes that as new products and innovations are launched, revenue will start seeing traction.
Management has claimed that the breakeven revenue point is roughly $4.5M/quarter or ($18M annually). TTM revenues are $16.8M, so not even enough to break even. As governments at all levels look to cut spending, Digital Ally prospects are not looking favorable. Currently, the company is not even able to break even, thereby destroying shareholder value each quarter. I do not see this changing drastically anytime soon.