Urbanization And AI Will Revolutionize Touchless Screening

Key Takeaways

• Surging regulatory mandates and expanding venue categories are set to accelerate adoption, greatly enlarging recurring revenue streams and addressable markets ahead of analyst expectations.
  
• Operational improvements and new product launches strengthen scalability, boost customer retention, and support margin expansion through increased cross-selling and higher customer value.
  
• Heightened regulatory, operational, and competitive pressures, along with ongoing high costs and business model shifts, threaten Evolv's growth, margins, and long-term profitability.

Catalysts

Provides artificial intelligence (AI)-based weapons detection for security screening in the United States and internationally.

• While analysts broadly agree that Evolv's low market penetration (below 10% in key verticals) presents long-term opportunity, the true addressable market is likely dramatically understated as rising global threats and expanding categories of venues-such as distribution warehouses, transportation sites, and international markets-push adoption well beyond school, hospital, and entertainment settings, fueling a multi-fold acceleration in recurring revenue potential over the next decade.
  
• Analyst consensus highlights the impact of regulatory changes like California's mandate for hospital security screening, but this likely underestimates the speed and magnitude of nationwide and potentially international legislation expected in the wake of escalating high-profile incidents, which could drive an exponential increase in mandatory deployments and sustained, higher-margin recurring revenue far sooner than forecast.
  
• The combination of accelerating urbanization and the global normalization of AI-based automation will drive widespread, mainstream adoption of touchless weapons detection, removing many historical barriers to large-scale deployment and materially increasing total addressable market size, thus compounding revenue growth well into the future.
  
• Evolv's recent leadership overhaul, operational realignment, and robust rebound in customer retention post-FTC inquiry have created a significantly more scalable and resilient organizational platform; this positions the company to unlock higher operating leverage and margin expansion much faster than anticipated as recurring-revenue growth compounds.
  
• The launch of new offerings such as the Certified Pre-Owned program and eXpedite not only expands addressable segments-including price-sensitive customers and those needing enhanced screening-but also accelerates cross-selling within the existing base, increasing net customer lifetime value, driving ARR, and supporting higher long-term earnings than generally expected.

Evolv Technologies Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Evolv Technologies Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Evolv Technologies Holdings's revenue will grow by 21.9% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Evolv Technologies Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Evolv Technologies Holdings's profit margin will increase from -39.1% to the average US Electronic industry of 8.8% in 3 years.
• If Evolv Technologies Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $18.2 million (and earnings per share of $0.1) by about August 2028, up from $-44.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 105.1x on those 2028 earnings, up from -25.8x today. This future PE is greater than the current PE for the US Electronic industry at 23.5x.
• Analysts expect the number of shares outstanding to grow by 4.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.09%, as per the Simply Wall St company report.

Evolv Technologies Holdings Future Earnings Per Share Growth

Risks

• Significant public and legislative scrutiny around surveillance, AI-based security, and data privacy could increase regulatory risk for Evolv's solutions, potentially limiting adoption and shrinking market opportunity-which would in turn constrain revenues and long-term revenue growth.
  
• Rapid advances in alternative security technologies, such as biometrics or drone surveillance, and intensifying competition from both incumbents and new entrants may erode Evolv's competitive advantage, creating pricing pressure and threatening revenue growth and margins.
  
• Recent operational challenges-including an FTC inquiry, a financial restatement that shifted $3.1 million in revenue, and a full overhaul of the executive team-signal governance and internal control weaknesses, which could undermine investor confidence and weigh on valuation and earnings multiples.
  
• Persistent high operating expenses, ongoing restructuring costs, required heavy R&D investment to stay ahead of evolving threats, and the need for substantial capital expenditures to support hardware subscription growth could compress gross margins and limit net margins for an extended period.
  
• Earnings visibility may be impeded by the shift to pure subscription models, slower ramp-up in recurring SaaS revenues versus traditional hardware sales, and the challenge of maintaining rapid subscriber growth, all of which increase risk to future revenue, cash flow generation, and long-term profitability.

Valuation

• The assumed bullish price target for Evolv Technologies Holdings is $8.25, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Evolv Technologies Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.25, and the most bearish reporting a price target of just $5.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $206.1 million, earnings will come to $18.2 million, and it would be trading on a PE ratio of 105.1x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $6.98, the bullish analyst price target of $8.25 is 15.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.