Last Update 17 Feb 26

SSTI: Orlando Hub And Large Contracts Will Support Future Recovery

Analysts have reduced their price target on SoundThinking from $16 to $10, citing lower confidence in the pace of revenue and margin recovery, as well as uncertainty about the timing of large contract conversions and international deployments.

Analyst Commentary

Recent research highlights a mixed outlook on SoundThinking, with enthusiasm around the product set tempered by questions about timing and execution in the near term.

Bullish Takeaways

Analysts acknowledge continued product innovation, which they see as a foundation for future growth opportunities even as current execution faces delays.
The company’s focus on large contracts and international deployments is viewed as a potential long term growth driver, assuming these opportunities ultimately convert.
Some investors may view the reduced price target to $10 as resetting expectations to a level that better reflects current execution risks, which can help reduce valuation pressure.
The move to a more neutral stance is framed by some as a wait and see approach rather than a loss of confidence in the company’s core offerings.

Bearish Takeaways

Lower guidance for FY25 and FY26 has reduced confidence in the pace of revenue and margin recovery, which weighs on valuation support.
Near term go to market challenges and delayed deployments raise concerns about execution risk and the predictability of the revenue ramp.
Uncertainty around the timing of large contract conversions and international deployments makes near term growth durability harder for analysts to underwrite.
The price target cut from $16 to $10 reflects a more cautious stance on how quickly management can translate the current pipeline and product set into consistent financial performance.

What's in the News

SoundThinking opened a new Alert Review Center in downtown Orlando that serves as the permanent hub for its SafePointe alert review operations, bringing previously distributed roles into one centralized facility (Key Developments).
The Alert Review Center supports SoundThinking's AI enabled SafePointe weapons detection system, where trained reviewers assess potential threats in real time for customers in hospitals, casinos, corporate campuses, and other public spaces across the country (Key Developments).
The company plans to staff the Orlando facility with nearly 30 full time employees, consolidating remote roles from multiple states and adding to the local technology and public safety workforce (Key Developments).
The new center occupies 1,872 square feet in the Regions Bank Tower under a three year renewable lease, and is already fully operational and supporting SafePointe customers nationwide (Key Developments).

Valuation Changes

Fair Value: $15.50 remains unchanged, indicating no adjustment to the modeled intrinsic value per share in this update.
Discount Rate: The discount rate has fallen slightly from 8.56% to about 8.56%, a very small refinement in the risk assumption used for cash flow modeling.
Revenue Growth: Revenue growth is effectively unchanged at about 9.11%, reflecting a stable view on top line expansion assumptions.
Net Profit Margin: Profit margin has fallen from roughly 12.34% to 11.50%, implying a more conservative view on future profitability levels.
Future P/E: Future P/E has risen slightly from about 14.45x to 15.50x, suggesting a modestly higher earnings multiple being applied to projected results.

Expanding adoption in public, private, and critical infrastructure sectors, coupled with regulatory support, is driving market growth and recurring revenue opportunities.
Continuous AI-driven platform innovation and scalable operations are improving margins, supporting upselling, and positioning the company for accelerated earnings growth.
SoundThinking faces revenue volatility due to municipal contract risk, public scrutiny, budget constraints, competition, and slow progress in diversifying beyond its main product.

Catalysts

About SoundThinking

A public safety technology company, provides data-driven solutions and strategic advisory services for law enforcement, security teams, and civic leadership.What are the underlying business or industry changes driving this perspective?

Heightened public and private sector demand for advanced security solutions-exemplified by expanding deployments in U.S. cities (e.g., New Orleans) and reference wins from critical infrastructure (utility substations, embassies) and private enterprises-points to a growing total addressable market and increasing recurring revenue.
Continuous innovation and integration of AI, cloud, and IoT (e.g., drone-as-first-responder, AI-driven PlateRanger/CrimeTracer integrations, perimeter-based sniper detection) enhances platform value, supports upselling/cross-selling, and is likely to drive higher average revenue per account while improving gross margins through operational efficiencies.
Strong pipeline visibility (over $37 million for 2025 and growing international interest) and resilient customer retention provide a high degree of revenue predictability and support future growth, even as the company absorbs the loss of major contracts like Chicago.
Expansion into new verticals (healthcare/campuses via SafePointe, utility/critical infrastructure, international cities) and anticipated regulatory tailwinds (e.g., California AB 2975 mandating weapon screening) broaden SoundThinking's addressable market and create multiple avenues for revenue acceleration.
Increasing operational leverage, with flat or declining OpEx as a percentage of revenue due to scalable software and AI investments, sets the stage for margin expansion and accelerated earnings growth as new contracts and products come online.

SoundThinking Earnings and Revenue Growth

SoundThinking Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming SoundThinking's revenue will grow by 9.5% annually over the next 3 years.
Analysts are not forecasting that SoundThinking will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate SoundThinking's profit margin will increase from -9.7% to the average US Software industry of 13.1% in 3 years.
If SoundThinking's profit margin were to converge on the industry average, you could expect earnings to reach $17.9 million (and earnings per share of $1.37) by about September 2028, up from $-10.1 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.0x on those 2028 earnings, up from -14.9x today. This future PE is lower than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to grow by 1.61% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.51%, as per the Simply Wall St company report.

SoundThinking Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy reliance on municipal contracts exposes SoundThinking to delays, renewals, and potential nonrenewals, as seen with Puerto Rico's bureaucratic RFP process and Chicago's contract loss-this creates significant revenue volatility and impacts earnings predictability.
Persistent political and public scrutiny of law enforcement technology, especially with the mention of New York's political landscape and historical references to "defund the police," could result in reduced government support or adverse legislation, decreasing future demand and impacting long-term revenue growth.
Budget constraints in municipal and government sectors, referenced by booking delays and deal timing issues, can lead to postponed or downsized contracts, directly pressuring near
and long-term revenue and potentially limiting margin expansion.
Increased competition from other providers, such as Flock and innovations in AI-driven solutions, raises the risk that SoundThinking's offerings may become less differentiated, which could erode pricing power, lower gross and net margins, and threaten future earnings growth.
Despite investments in new product lines like SafePointe and CrimeTracer, SoundThinking's ability to accelerate diversification beyond ShotSpotter remains unproven; any failure to achieve product adoption or integration could maintain high product concentration risk and suppress revenue/margin growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $21.5 for SoundThinking based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $19.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $136.4 million, earnings will come to $17.9 million, and it would be trading on a PE ratio of 20.0x, assuming you use a discount rate of 8.5%.
Given the current share price of $11.81, the analyst price target of $21.5 is 45.1% 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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