TLS: Share Repurchases And AI Compliance Rollout Will Drive Upside

Analysts have raised their price target on Telos to reflect a substantially higher fair value estimate of 7.50 dollars from 4.00 dollars, despite moderating revenue growth and slightly lower margin forecasts. They now expect the market to assign a richer future earnings multiple.

What's in the News

• Telos updated its share repurchase activity, buying back 584,213 shares in the latest tranche and completing a program totaling 3,622,602 shares, or 5.13% of outstanding shares, for 18.92 million dollars under the May 2022 authorization (company buyback update).
• The company issued new guidance for the fourth quarter of 2025, projecting revenue of 44.0 million to 46.3 million dollars, implying 67% to 76% year over year growth, and full year 2025 revenue of 162.0 million to 164.3 million dollars, or 50% to 52% growth, reflecting a stronger than expected second half (corporate guidance).
• Telos launched Xacta.ai, an AI driven capability embedded in its Xacta cyber GRC platform that accelerates compliance work with features such as instant control implementation, AI based control validation, automated remediation suggestions, and contextual risk insights (product announcement).
• A U.S. federal agency became the first to deploy Xacta.ai enterprise wide, expanding its use of Telos solutions to automate compliance mapping and shorten authorization timelines across its environment (client announcement).
• Telos continued expanding its TSA PreCheck enrollment footprint, increasing the number of active enrollment centers to nearly 500 locations across more than 40 U.S. states and territories, with plans for further site additions and extended operating hours through 2025 (business expansion).

Valuation Changes

• The fair value estimate has risen significantly, increasing from 4.0 dollars to 7.5 dollars per share.
• The discount rate has edged higher, moving from approximately 8.45% to 8.49%.
• The revenue growth forecast has fallen materially, decreasing from about 39.3% to roughly 21.5%.
• The net profit margin outlook has declined slightly, from about 13.1% to approximately 12.4%.
• The future P/E multiple has increased sharply, rising from roughly 9.0x to about 23.0x expected earnings.