On Monday, B.Riley increased its price target on Telos Corporation (NASDAQ:TLS) shares to $5.50, up from the previous $4.50, while maintaining a "Buy" rating on the stock. This adjustment follows Telos's reported strong fourth-quarter 2023 results that were announced before the market opened on Wednesday, with revenues and adjusted EBITDA surpassing expectations.
Telos reported quarterly revenues of $41.1 million and an adjusted EBITDA of negative $3.2 million, which was better than the anticipated $32.0 million in revenue and negative $5.5 million in adjusted EBITDA. The company's robust performance is attributed to significant new business awards, amounting to $525 million over five years. This is expected to drive sequential growth in the second half of 2024 and robust growth in the fiscal year 2025.
Despite the positive outlook, B.Riley has revised its fiscal year 2024 revenue and adjusted EBITDA estimates for Telos downward from $135 million and negative $8.2 million to $120 million and negative $16.4 million, respectively. However, the firm has increased its estimates for fiscal year 2025 from $156.5 million in revenue and negative $0.8 million in adjusted EBITDA to $170 million in revenue and $3.6 million in adjusted EBITDA.
The analyst at B.Riley highlighted the potential for Telos to outperform these projections, citing conservative assumptions regarding the contributions of new programs, the expansion of TSA PreCheck, and sustained new business capture.
The increased price target to $5.50 is based on an enterprise value to sales multiple of approximately 2 times, up from the previous multiple of around 1.5 times, as applied to their blended fiscal year 2024 and 2025 estimates.
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