We came across a bullish thesis on Axon Enterprise, Inc. (AXON) on Analyzing Good Businesses’ Substack by YoungHamilton. In this article, we will summarize the bulls’ thesis on AXON. AXON Technologies, Inc.’s share was trading at $393.25 as of Sept 26th. AXON’s trailing and forward P/E were 103.86 and 62.89 respectively according to Yahoo Finance.
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Axon Enterprise focuses on minimizing gun-related fatalities by providing less-lethal alternatives. Their key offerings include TASER devices, body and vehicle cameras, and cloud-based evidence management software. They have transitioned to a subscription model that integrates hardware sales with software services. The TASER 10, one of their key products, helps in de-escalating situations and improving accountability by automatically uploading data to their digital evidence system. Most of their revenue now comes from software, especially through Evidence.com, which manages video evidence from their cameras, making things more transparent and reducing complaints and use-of-force incidents.
The company plans to increase its topline by 20% annually which can be seen through initiatives like their Officer Safety Plan subscriptions have made devices more accessible to officers, the company also plans to maintain 25% profit margins. The company has become much stronger by focusing on subscription-based revenue. In 2016, only 34% of its income came from subscriptions, but by 2023, that number jumped to 95%. This means the company now has a steady and reliable income. Additionally, the company has $7.1 billion worth of RPO which is 455% of its current yearly revenue. Axon’s competitive edge lies in the high switching costs of its products. With more than 900,000 TASER devices used worldwide, Axon effectively leveraged this installed base to promote and sell its software and sensor products. Axon has expanded its TAM to $77 billion, driven by segments like digital evidence management, real-time operations, Axon Air, and camera hardware. The company is also entering into federal markets and international territories, particularly in Europe and Latin America, where there is still significant growth potential.
Recent acquisitions like Sky-Hero and Fusus have enhanced Axon’s technological capabilities and market presence, adding $27 billion to its TAM. These acquisitions complement Axon’s existing products and enhance its software platform, promoting growth through technology integration.
Despite challenges such as the defund-the-police movement, Axon’s products remain essential for law enforcement. The demand for body cameras and evidence management software has increased, driven by new legislation. Axon’s solutions are a small but crucial part of law enforcement budgets, making them a cost-effective investment for agencies looking to improve efficiency and accountability. Given Axon’s strong growth and financial health, the stock looks interesting. With expected revenues over $2 billion and strong profit margins, Axon’s valuation could improve significantly, offering potential upside for investors.
Axon Enterprise, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held AXON at the end of the second quarter which was 35 in the previous quarter. While we acknowledge the risk and potential of AXON as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AXON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.