Stock Analysis & Ideas

Axon Enterprise Stock (NASDAQ:AXON) Surges after Excellent Q3

Story Highlights

Axon Enterprise shot up big in today’s trading session. A combination of factors, including rising interest in non-lethal deterrents, offer support for the company in the long term.

Axon Enterprise (NASDAQ:AXON) is one of those companies that most won’t recognize immediately until they find out what it makes. The maker of the Taser line of defense tools is enjoying a nice surge in today’s trading session. Axon’s surge came with its earnings report, which saw the company beat earnings and revenue expectations while hiking its full-year revenue guidance.

The company posted $0.60 per share in earnings, which readily beat TipRanks projections that called for $0.49 per share. It’s a bit of a lag behind last year’s figures, which saw the company post $1.17 per share.

Revenue, meanwhile, was a different—and better—story. The company posted $311.75 million in revenue, which beat estimates by ~12.6%. It’s also a substantial boost from this time last year when the company posted just $231.99 million in revenue. It also represents the fourth quarter in a row that the company beat revenue estimates.

While Axon itself may be secondary to some of its brand names in terms of brand recognition, the company has quite a bit going on quietly behind the scenes. Given the combination of increasingly fractious geopolitics and the likely fallout therein, I’m bullish on Axon Enterprise.

Is Axon Enterprise Stock a Good Buy Right Now?

Turning to Wall Street, Axon Enterprise has a Strong Buy consensus rating. That’s based on eight Buys and one Hold assigned in the past three months. The average Axon Enterprise price target of $162.33 implies 7.77% downside potential. Analyst price targets range from a low of $130 per share to a high of $200 per share.

Axon enjoys quite a bit of support. Axon Enterprise’s Smart Score is 8 out of 10 on TipRanks. That’s the lowest level of “outperform” and enough to suggest a good chance the company will ultimately outperform the broader market.

Insider trading at Axon, however, is turning negative. The company’s chief financial officer sold a total of $233,900 worth of stock two months ago, which is not ideal.

While investor sentiment may be a mixed bag, the company’s financials are demonstrating much clearer points. For instance, consider revenue. Axon Enterprise’s revenue has been on an upward trend for the last three quarters.

Revenue dropped between September and December 2021, from the aforementioned $231.99 million to $217.58 million. However, in March 2022, revenue increased to $256.43 million. June 2022 saw a jump to $285.61 million. Now, we have $311.75 million.

Tailor-Made for Declining Civility

The biggest point in Axon’s favor is its stock in trade. Axon not only makes the Taser line of personal defense tools but also police bodycams, among other things.

Such a product line all but ensures the company will have a steady flow of business from government agencies. Government agencies have been considered the customer of last resort dating as far back as the Great Depression and possibly farther.

That much is reflected in the company’s recent hike to its full-year outlook. The company boosted its revenue expectation for 2022 to between $1.15 billion and $1.16 billion.

That, according to the company, is roughly a 34% growth rate at the midpoint. Growth these days is comparatively hard to come by, so finding it—and in these proportions—is a reason to pay attention.

Granted, the company’s share price may have already priced that in. That’s especially the case given that the company currently carries downside risk regarding its average price target.

However, there’s more going on here than just surging revenue predictions. The company is out to reduce gun deaths between police and the public. Its stated goal is to cut the number of deaths between police and the public in half by 2033. That makes sense. Tasers are often used to reduce the need for a handgun.

It’s not only a clever marketing move, but it also offers great press. Axon Enterprise is out to stop deaths. That’s the kind of thing that gets constituents in local areas interested.

Stories about people getting shot by police tend to damage tourism, among other things – especially if said stories come out in numbers. Already, Clearlake in California is considering a five-year agreement with Axon to upgrade bodycam systems and a new digital system to manage evidence.

Conclusion: Ready for the Next Generation of Policing

Granted, there are some negative signs ahead for Axon. The company’s downside risk isn’t exactly a bell ringer. Insider selling tends to be distressing too. The recent surge in share price helps, though. Rising expectations of revenue also provide support, and a growing interest in the product line from government agencies means a pretty steady market base.

I’m bullish on Axon Enterprise, thanks mainly to its product line. Nonlethal deterrents and improved bodycam systems for police are recent hot-button issues that still have plenty of life to them. That helps secure better sales for Axon and better performance for investors.

Disclosure

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