Why Are Napco (NSSC) Shares Soaring Today

What Happened?

Shares of security systems manufacturer Napco (NASDAQ:NSSC) jumped 8.9% in the morning session after the company received an analyst upgrade from Craig-Hallum and positive attention from other firms following strong fiscal fourth-quarter earnings results. 

The security technology company reported earnings per share of $0.33, beating analyst expectations of $0.28. This strong performance prompted Craig-Hallum to upgrade the stock from Hold to Buy and raise its price target to $40.00. The firm noted that the demand environment has "markedly improved" after previous concerns, with larger distributors resuming normal ordering patterns. 

Other analysts also reacted positively. DA Davidson maintained its Buy rating while significantly increasing its price target to $45 from $33. Additionally, Needham set a new price target of $36 for the stock. The combination of an earnings beat and bullish analyst sentiment appears to be driving the shares higher.

Is now the time to buy Napco? Access our full analysis report here, it’s free.

What Is The Market Telling Us

Napco’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 1 day ago when the stock gained 6.1% on the news that the company reported second-quarter results that surpassed analyst expectations on the top and bottom lines. The security systems manufacturer reported revenue of $50.72 million and GAAP earnings of $0.33 per share, beating Wall Street's estimates by 14.1% and 23.7%, respectively. However, the results presented a mixed picture for the quarter. 

While the company significantly outperformed expectations, its sales were flat compared to the same quarter last year, and its earnings per share declined from $0.36. Furthermore, its operating margin contracted to 23.8% from 31.1% a year ago, suggesting that expenses increased relative to revenue. Despite these year-over-year headwinds, investors appeared to focus on the strong beats against consensus estimates, sending the stock higher.

Napco is up 3.9% since the beginning of the year, but at $36.36 per share, it is still trading 23.3% below its 52-week high of $47.40 from August 2024. Investors who bought $1,000 worth of Napco’s shares 5 years ago would now be looking at an investment worth $2,985.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.