Last Update 05 Jan 26

SSTI: Chicago RFP Progress Will Support Contract Recovery And Future Execution

Analysts have trimmed their price targets on SoundThinking to around $14, citing a recent top line miss tied to contract delays and a softer 2026 outlook, even as they point to a potentially supportive RFP backdrop in Chicago.

Analyst Commentary

Bullish Takeaways

Bullish analysts view the new US$14 price target as accounting for recent contract timing issues while still reflecting what they see as an attractive setup for future execution.
The commentary around a potentially positive trend for the Chicago RFP is seen as an important support for revenue visibility and could help underpin the current valuation framework if it converts as expected.
Supportive analysts argue that, despite a Q3 top line miss, the company is still positioned in a way that could benefit if delayed contracts are eventually awarded and implemented.
They also see the updated target as a reset that may give the company more room to meet or exceed expectations, rather than having to clear a higher previous bar.

Bearish Takeaways

Bearish analysts focus on the Q3 top line miss as a sign that contract timing and execution risk may be higher than previously assumed and that this can weigh on revenue consistency.
The softer 2026 outlook is viewed as a headwind for growth expectations and can limit how much investors are willing to pay on forward revenue or earnings multiples.
Some see the reliance on a few large contracts, such as the Chicago RFP, as concentration risk, which can make both forecasts and valuation more fragile if deals slip or are resized.
The cut from the prior US$19 target to US$14 is interpreted as a reassessment of what the business can realistically deliver over the next few years, which may temper enthusiasm until there is clearer evidence of contract flow.

What's in the News

Opened a new Alert Review Center in downtown Orlando to centralize SafePointe alert review operations, with plans for nearly 30 full-time employees under a three year renewable lease. The center will support SafePointe deployments across hospitals, casinos, corporate campuses and other public spaces nationwide (Key Developments).
Completed a share repurchase of 873,056 shares, representing 6.91% of the company, for US$14.62 million under the buyback announced on November 8, 2022. This included 160,271 shares, or 1.25%, bought between July 1, 2025 and November 12, 2025 for US$1.99 million (Key Developments).
Revised full year 2025 revenue guidance to approximately US$104.0 million, from a prior range of US$111.0 million to US$113.0 million, after Q3 revenue declined 4% year over year due primarily to contract delays that the company still expects to recognize in the near future (Key Developments).
Issued 2026 earnings guidance that indicates expectations for accelerated revenue growth and increased profitability in 2026 and beyond, providing investors with a reference point for longer term planning (Key Developments).
Reported Q3 2025 impairment charges on property and equipment of US$237,000, compared with US$54,000 a year earlier, adding a non cash expense item to the quarter's results (Key Developments).

Valuation Changes

Fair Value Estimate: Held steady at US$15.50 per share, indicating no change in the modeled fair value level.
Discount Rate: Adjusted slightly lower from 8.61% to 8.59%, a very small refinement in the risk assumption used in the model.
Revenue Growth: Kept effectively unchanged at about 9.11%, signaling a consistent view on the company’s top line potential in the model.
Net Profit Margin: Trimmed slightly from about 12.41% to 12.34%, reflecting a modestly less optimistic margin assumption.
Future P/E: Tweaked marginally higher from 14.39x to 14.46x, indicating a small change in the valuation multiple applied to future 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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