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On Monday, DA Davidson analysts revised the price target for Telos Corp . (NASDAQ: NASDAQ:TLS) shares, reducing it from $3.50 to $2.50, while maintaining a Neutral rating on the stock. Currently trading at $2.61, the stock has declined 16% year-to-date and appears undervalued according to InvestingPro Fair Value calculations. The adjustment follows Telos’ recent quarterly financial results, which exceeded expectations, particularly in terms of EBITDA, outperforming by $3.7 million against a revenue beat of $0.8 million. InvestingPro data shows the company maintains a solid current ratio of 3.64, though its overall financial health score remains weak.
The company’s guidance for the first quarter was described as mixed, with revenue projections slightly below expectations but EBITDA forecasts modestly above. For the calendar year 2025, Telos is anticipated to generate upwards of $150 million in total revenue. However, revenue from the Defense Manpower Data Center (DMDC) and the Department of Homeland Security (DHS) is now projected to be between $50 million and $75 million, a decrease from the previously estimated $60 million to $85 million. This adjustment is attributed to a higher mix of software versus hardware sales, resulting in less immediate revenue recognition.
The analysts noted that the CY25 EBITDA is also implied to be slightly below earlier estimates. They mentioned that the new administration appears to be delaying new program wins, which introduces additional risk to Telos’ new business prospects. Recent InvestingPro analysis reveals additional insights about Telos’ financial position and growth prospects, with over 30 key metrics and exclusive ProTips available for subscribers.
In their commentary, DA Davidson analysts stated, "Q4 results were nicely ahead, particularly on EBITDA ($3.7M ahead vs. $0.8M Rev beat). Q1 guidance was mixed, with Rev modestly below but EBITDA modestly ahead. CY25 color was mostly maintained, continuing to paint a picture of ~$150M + in total Rev, though DMDC / DHS Rev is now expected to be $50-75M vs. $60-85M previously given higher software vs. hardware mix & thus less upfront Rev Rec. CY25 EBITDA also implied a bit below. New administration seems to be putting new program wins on hold, creating some new business risk. We remain NEUTRAL rated; lowering PT from $3.50 to $2.50."
In other recent news, Telos Corporation reported its fourth-quarter earnings, surpassing analyst expectations with adjusted earnings per share of -$0.04 compared to the anticipated -$0.11. However, the company’s revenue saw a significant year-over-year decline of 36%, totaling $26.4 million, though it slightly exceeded the analyst consensus of $25.62 million. This revenue decline was primarily due to a 78% drop in the Secure Networks segment, despite a 6% growth in the Security Solutions segment. Telos reported a cash gross margin of 47.0% for the quarter, which was higher than the top end of its guidance, aided by lower-than-expected costs. The company’s adjusted EBITDA also surpassed guidance due to higher cash gross profit and reduced adjusted operating expenses. CEO John B. Wood highlighted progress in expanding the TSA PreCheck® program and transitioning key government contracts. Looking forward, Telos provided Q1 2025 revenue guidance ranging from $28.2 million to $30.2 million, indicating sequential growth. The company expects the Security Solutions segment to be a key driver of this growth, with projections of a high single-digit to mid-teens percentage increase.
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