Editor's note: This Stocks Under $10 alert was originally sent to subscribers April 30 at 2:55 p.m. EDT. It's being republished as a bonus for TheStreet.com and RealMoney.com readers.
After you read this, we will initiate a 600-share position in Taser International ( TASR) in the Stocks Under $10 model portfolio. Last week, the stun-gun maker reported quarterly results that fell short of estimates, creating an opportune entry point for us. Shares were recently trading at $8.35 and have a very favorable risk/reward at the current price. On April 3, Taser warned that its results for the first quarter would miss estimates because of the delay of some orders. Shares sank below $8 on the news, given the high expectations following last quarter's solid results. Taser is now 22% off its 52-week high around $11, set a year ago, while most of the major indices have seen gains of 15% or more over the same time frame. One of the biggest disappointments for the quarter was a drop in gross margins to 58.1% from 64.5% last year. Lower gross margins are normally seen as a negative, but this decline was the result of three setbacks: lower sales from the delay of several orders, investments in upcoming product launches, and additional costs associated with expanding capacity to meet growing demand. So let's examine these issues in more detail.