Evolv selloff on filing delay a buying opportunity, says Craig-Hallum

Craig-Hallum analyst Jeremy Hamblin keeps a Buy rating on Evolv (EVLV) with a $5.75 price target after the company delayed the filing of its Q3 report after an ad hoc committee of the board determined that certain financial statements should not be relied upon for the period from Q2 of fiscal 2022 to Q4 of fiscal 2024. The scope of the issue is estimated to impact $4M to $6M of revenue over the nine-quarter period with the majority of the finding tied to premature revenue recognition, the analyst tells investors in a research note. The firm believes the issue stems from some customers receiving extended contract terms that would increase the period of recognition for subscription service revenues. While the news “comes as a clear disappointment that will strike a blow to the stock and management credibility in the near term,” the issue does not appear to reflect Evolv’s underlying fundamentals and momentum in the business, contends Craig-Hallum. It notes the total revenue impacted over the period amounts to just 2% to 3% of company revenues. The firm views the stock down 40% “as too aggressive of a reaction to the news” and views the situation as a buying opportunity.