GoPro Could Thwart Digital Ally's Growth Potential

Digital Ally, Inc. (NASDAQ: DGLY) initially rose more than 6 percent after the company announced that it had received a patent for traffic scanning LIDAR (Laser Detection and Ranging) speed measurement technology.

The news was music to investors' ears, but will the growth spurt last?

"The thing that could make the case that it deserves to go higher is if they blowout earnings," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga.

Digital Ally will report its fourth quarter results after the market close Monday. If the company guides positively, Udall believes the stock could go higher.

"It's a product traction new engagement story," he added. "[They need to] prove they're winning deal after deal."

Digital Ally might not be able to sustain its position as new firms enter the space, however. The company (which has a market cap of just $37 million) could be eclipsed by an unlikely manufacturer: GoPro Inc (NASDAQ: GPRO).

Related Link: GoPro Hero Vs. Xiaomi Yi: Do Investors Have Something To Worry About?

'Easily Deployed'

Udall believes that GoPro cameras could be "easily deployed" in the security and law enforcement space.

"I think GoPro cameras are probably the best suited for that over anybody," he said. "That could be a massive market for them."

Rob Enderle, principal analyst at Enderle Group, said that GoPro could succeed because of its brand name and the fact that it could charge a lower price than competing firms.

"They've got the volumes that would allow them to drop the overall price of the product," Enderle told Benzinga. "On the other hand, GoPro doesn't have the reputation of being the kind of camera you can depend on in this kind of situation. They're not in the military/law enforcement area yet."

Enderle said that GoPro would have to build a reputation showing how its products can work successfully in a military and/or law enforcement environment.

"People's lives depend on this stuff," he added. "If you were using GoPro and you had a problem, you'd have to defend the fact that it looked like you were using a kid's toy, as opposed to something that was serious. But that can be done over time."

Enderle does not think the transition (from a consumer-only business to one that also helps law enforcement) would be that difficult for GoPro.

"And it would pull an awful lot of the revenue and profit out of the market for the other players who would have to convert over and compete on price," said Enderle.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.