On Tuesday, EF Hutton initiated coverage on Guardforce AI Co. (NASDAQ: GFAI) shares, bestowing a Buy rating and setting a price target of $4.50 on the company's stock. The firm's move comes after a detailed review of Guardforce AI's financial performance in the first half of 2024, which was publicly reported on September 25.
The company experienced a slight year-over-year sales decline of 2.4% in the first half of 2024, with revenues falling from $18 million to $17.5 million. However, this dip was attributed to the devaluation of the Thai Baht against the U.S. dollar. When adjusted for currency fluctuations, Guardforce AI actually saw its revenue increase by 5.2%.
Despite the nominal drop in sales, Guardforce AI's adjusted operating income showed signs of improvement. The company reported an operating loss of $1.7 million, which corresponds to a 10% operating margin. This is a significant improvement from the previous year's operating loss of $4.5 million, which represented a 25% operating margin.
EF Hutton's report highlighted the company's recent earnings trends and discussed forward expectations with Guardforce AI's management team, which is incorporated in Singapore. The firm's analysis reflects a comprehensive evaluation of the company's financial health and market position.
The new price target of $4.50 represents EF Hutton's confidence in the potential growth and recovery of Guardforce AI, as the company continues to navigate the global market and currency challenges.
In other recent news, Guardforce AI Co., Limited has reported a noteworthy 50% surge in gross profit for the first half of 2024. This increase was driven by improvements in gross profit margin and a shift to positive adjusted net income.
The gross profit margin rose to approximately 18.4%, up from 12.0% in the same period the previous year. This was partly due to strategic cost-control initiatives and growth in higher-margin businesses, such as Guardforce Digital Machine, which witnessed a 74.3% revenue increase.
The company's selling, distribution, and administrative expenses decreased by 25.7%, contributing to an 82.5% reduction in operating loss to approximately $2.1 million. Adjusted net income marked a significant improvement, turning positive at roughly $0.1 million. Despite these positive developments, net revenue dipped slightly by 2.4% to approximately $17.6 million due to foreign currency exchange rates.
Among other recent developments, Guardforce AI consolidated its legacy business, secured long-term contracts with key clients, and expanded its retail client base. The company also made significant strides in its AI technology, developing GFAI Agents as the core technology foundation for AI-driven travel and purchase solutions. These efforts have expanded services to over 25,000 retail stores, setting the stage for Guardforce AI's goal of becoming a leading AI solution provider.
InvestingPro Insights
To complement EF Hutton's analysis, recent data from InvestingPro offers additional insights into Guardforce AI's financial position. The company's market capitalization stands at $12.59 million, reflecting its current market valuation. Notably, Guardforce AI's Price to Book ratio is 0.53, indicating that the stock may be undervalued relative to its book value. This aligns with one of the InvestingPro Tips, which points out that the company is "Trading at a low Price / Book multiple."
Another relevant InvestingPro Tip highlights that Guardforce AI "Holds more cash than debt on its balance sheet," suggesting a relatively strong liquidity position. This could provide the company with financial flexibility as it works to improve its operating performance, as noted in EF Hutton's report.
However, investors should be aware that Guardforce AI is "Quickly burning through cash" and is "Not profitable over the last twelve months," according to additional InvestingPro Tips. These factors may contribute to the stock's volatility, which is also mentioned as a characteristic of GFAI's price movements.
For a more comprehensive analysis, InvestingPro offers 15 additional tips for Guardforce AI, providing investors with a broader perspective on the company's financial health and market performance.
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