There’s something special about watching events live, whether you like sports, concerts or shows. I recently visited the T-Mobile Arena in Las Vegas to watch the Vegas Golden Knights take on the Detroit Red Wings and it was very special to get into the arena. I’ll explain it below.
A big part of any event is security. Unfortunately, the number of mass shootings has skyrocketed over the last 20 years. New York City has also seen an increase in violence on the subways, so they are turning to this company to keep people safe.
Regardless of our personal experience, we are all at least indirectly affected by unfortunate incidents as we go through strict security checks and long lines. However, there are problems with the security of conventional metal detectors – namely these Evolv Technologies (NASDAQ:EVLV) is trying to find a solution using artificial intelligence (AI) technology.
What is Evolv Technologies?
Evolv Technologies develops and sells scanners that use artificial intelligence to recognize firearms and other weapons based on their shape and other unique characteristics. The technology allows people to enter a venue without having to wait to be scanned in a single line. Wallets and keys do not trigger an alarm like a metal detector does. It also helps alleviate huge crowds waiting to enter a venue that could be targeted.
That was my experience at the T-Mobile Arena. Security was present when we entered, but I walked through without emptying my pockets. I noticed that the name on the device was a stock I own: Evolv. This is not a unique experience. By the end of 2023, over 4,500 Evolv machines will be in use.
It works like this. Security guards keep devices similar to tablets on the sidelines of people entering. When a gun or other weapon is detected, it is displayed on the device and identifies where it is on the person (bag, backpack, etc.). The security then asks the user to step aside and take the next steps. The devices are also used in schools and hospitals. Evolv reports that 40% of its business comes from schools, 10 to 15% from hospitals, 10 to 15% from professional sports and the remainder from amusement parks, tourist attractions, places of worship and workplaces.
Is Evolv Stock a Buy?
Evolv is experiencing rapid growth in customer numbers. From 2021 to 2023, the number increased from 200 schools to 800, from 30 hospitals to 300, and from 10 professional sports teams to 40. The city of New York’s recent announcement of its deployment of the devices could be a major catalyst for the stock. and other municipalities could follow.
The revenue model is partially recurring. After purchasing the machines, the customer pays a subscription to the software. As shown below, sales have skyrocketed due to increased adoption.
Revenue growth is excellent, but annual recurring revenue (ARR) will be critical to long-term success. ARR is important because it means Evolv will continue to make money once the market becomes saturated. The company reported impressive ARR growth of 120% to $75 million in 2023.
There’s a lot to like about this company. However, Evolv is still a relatively small company with a market cap of $700 million. It is in the high growth phase, so it is not profitable and carries increased risks. It is not a stock in which you can invest your entire portfolio. But in my opinion it is worth a speculative position.
The stock trades at a price-to-sales (P/S) ratio of 9, which is reasonable for a growing technology company. It is a necessary and innovative technology and a valuable tool that many use as part of a comprehensive security plan. Nobody will solve the problem. It’s time for an all-on-deck approach, and Evolv is one element.
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Bradley Guichard holds positions at Evolv Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
1 “Stealthy Artificial Intelligence (AI) Stock That Could Be Huge” was originally published by The Motley Fool