Axon: A Leader in Non-Lethal Weapons and Beyond
A Stellar 2024 Performance, But What’s Next?
Axon, the company behind the iconic TASER stun guns, has been on a tear in 2024, with its stock soaring 167% and earning a spot in the prestigious Nasdaq-100 index. However, the new year has brought a correction, with shares plummeting 19.9% from their 52-week high. Is this a buying opportunity or a sign of trouble ahead?
A Diversified Suite of Products and Services
Axon is more than just TASER guns. The company offers a range of products and services, including body cameras, fleet cameras, and a growing cloud software business, Axon Cloud. This diversified suite creates a flywheel effect, allowing Axon to cross-sell and upsell to its customers. For example, law enforcement agencies can use Axon’s body cameras and store the footage on Axon Cloud, while also utilizing the Draft One AI tool to streamline police reports.
Strong Net Revenue Retention and Subscription-Based Model
Axon’s stellar net revenue retention of 123% in Q3 2024 indicates that customers are not only renewing their contracts but also increasing their spending. This is a hallmark of a great software stock. Moreover, Axon’s revenue is becoming increasingly subscription-based, with 95% of its revenue coming from subscriptions in 2023. This predictable and recurring revenue stream makes Axon an attractive investment opportunity.
A Long-Term Winner with Global Opportunities
Axon’s impressive 2,063% total return over the past decade is a testament to its long-term success. However, the company is still in the early stages of tapping its global potential. With only 3% market penetration in Europe, 1% in Latin America, and 0% in Asia for its TASER guns, and similarly low penetration rates for its body cameras, Axon has a vast runway for growth ahead.
Axon Cloud: A Massive Opportunity
Axon Cloud, the company’s software suite, has reached only 4% penetration in the U.S. and has zero penetration in international markets. With a total addressable market of $77 billion, Axon Cloud presents a significant growth opportunity for the company.
Resilient Sales and Political Tailwinds
Axon’s sales are not driven by consumer demand, making them more resilient in economic downturns. Additionally, the current political environment, with a focus on law and order, could provide a tailwind for the company.
Valuation Concerns and Analyst Expectations
While Axon’s valuation is rich, with shares trading at 89.8 times consensus 2025 earnings estimates, the company’s rapid growth and strong execution make it possible for it to grow into this valuation over time. Wall Street analysts are also bullish, with a Strong Buy consensus rating and an average price target of $622.92 per share, implying 9.3% upside potential.
A Compelling Investment Opportunity
Despite the recent correction, I remain bullish on Axon due to its diversified suite of products and services, strong net revenue retention, and significant global opportunities. The company’s long-term success and growth potential make it an attractive investment opportunity for those willing to take a long-term view.
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