Last Update 13 Dec 25

SSTI: Chicago RFP Renewal Will Drive Future Contract Momentum

Analysts modestly reduced their price target on SoundThinking to $14.00 from $19.00, citing recent top line weakness, near term contract uncertainty, and a tempered 2026 outlook, while still highlighting positive momentum in key RFP processes and the company’s strong strategic positioning.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the maintained Buy rating as confirmation that the long term growth thesis remains intact despite near term volatility.
Positive momentum in the Chicago RFP is seen as a key potential catalyst that, if successfully renewed or expanded, could support upside to revenue forecasts and valuation multiples.
Analysts highlight the company’s strong competitive and strategic positioning in public safety technology as a driver of sustained demand and contract wins over the medium term.
Some bullish analysts argue that the reduced price target already reflects the Q3 top line miss and tempered 2026 outlook, creating a more balanced risk reward profile for long term investors.

Bearish Takeaways

Bearish analysts point to recent contract delays as a sign of execution risk, which could pressure near term revenue growth and justify a lower valuation benchmark.
The reduced outlook for 2026 raises concerns about the durability and pace of the company’s growth trajectory, particularly if large municipal contracts take longer to close.
Near term top line weakness heightens sensitivity to any additional disappointments in bookings or renewals, increasing the risk of further estimate cuts.
Some bearish analysts caution that reliance on a small number of high profile contracts may lead to elevated earnings volatility and constrain multiple expansion until visibility improves.

What's in the News

Lowered 2025 revenue guidance to approximately $104 million after a 4% year over year decline in third quarter revenues driven by delays in a few domestic deployments, while maintaining expectations that the delayed contracts will be recognized in the near future (Corporate Guidance: Lowered).
Introduced 2026 guidance signaling expectations for accelerated revenue growth and increased profitability beyond 2025, despite the nearer term reset in outlook (Corporate Guidance: New/Confirmed).
Announced CrimeTracer Gen3, a major upgrade that expands the product into an agency wide crime fighting solution with AI driven analysis, natural language search, and deep integration across the SafetySmart platform, with key capabilities rolling out from mid November 2025 through the end of 2025 (Product Related Announcements).
Updated on share repurchase activity, completing the buyback of 873,056 shares, or 6.91% of shares outstanding, for $14.62 million under the program announced in November 2022, including 160,271 shares repurchased between July 1 and November 12, 2025 for $1.99 million (Buyback Tranche Update).
Reported higher impairment charges on property and equipment of $237,000 for the third quarter of 2025 compared with $54,000 a year earlier, adding to pressure on reported earnings (Impairments/Write Offs).

Valuation Changes

Fair Value Estimate unchanged at $15.50 per share, indicating no revision to the intrinsic value assessment.
Discount Rate edged down slightly from 8.61% to 8.61%, implying a marginally lower required return in the valuation model.
Revenue Growth effectively unchanged at approximately 9.11%, suggesting stable long term top line growth assumptions.
Net Profit Margin essentially flat at about 12.41%, reflecting no material change in long term profitability expectations.
Future P/E decreased marginally from 14.39x to 14.39x, signaling a slightly lower multiple applied to forward earnings.

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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