An increasingly unignorable problem, America’s metropolitan areas have devolved into zones of escalating criminality, presenting a surprising win-win opportunity for security technology firm Axon Enterprise (NASDAQ:AXON). According to GlobalData, Axon “provides sensors hardware such as on body cameras, fleet in car video systems, and computer-aided dispatch software,” and more.
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Essentially, the firm can help navigate the tricky balance between helping police officers enforce the law and adhering to concerns about social equity. Therefore, I am bullish on AXON stock and believe it can continue climbing.
AXON Stock No Longer Trades in Theoretical Realm
Presently, one of the contributing factors to the political division in America centers on theoretical musings. Pundits from both sides of the aisle often deploy fear-based language to forecast what might happen if certain policies enter (or don’t enter) the legislative framework. However, such discourse deals with hypotheticals, which then lead to opinionated shouting matches. For AXON stock, the main catalyst stems from factual developments.
In May of this year, big-box retailer Target (NYSE:TGT) announced its financial results for the first quarter of Fiscal Year 2023. On the positive side of the discussion, management spoke of “continued traffic and sales growth in an increasingly challenging environment.”
However, what really caught Wall Street’s attention was the profitability guidance. Target Chair and CEO Brian Cornell stated in part that “As we look ahead, we now expect shrink will reduce this year’s profitability by more than $500 million compared with last year. While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue.”
In other words, advocacy groups calling for positive social change can’t criticize law enforcement as a blanket statement. Are there bad seeds in the field of law enforcement? Absolutely. No one denies this because bad seeds exist in every segment of society. However, it’s impossible to discuss positive change without also incorporating the topic of accountability.
Unfortunately, the lax attitude toward relatively petty crime came at a cost, as Target attested. Still, Axon may help constructively reverse the criminality wave through accountability-centered law enforcement. For those willing to take the risk, AXON stock may be quite lucrative.
Axon Enterprise Acts as an Intermediary
To be completely upfront, it’s impossible to fully contextualize the nuances involved in law enforcement, particularly in high-crime areas. However, the basic conflict – not ignoring that other subsets of conflict exist – centers on the juxtaposition between the dignities requested by underprivileged communities and the often-extreme dangers that police officers face. Historically, this arena was rife with misunderstandings. Still, Axon’s relevance is that it can act as a critical intermediary.
In the decisively more “analog” years, many law enforcement agencies lacked mechanisms of accountability. Therefore, if a suspect in a police encounter perished, only the responding officers – and perhaps witnesses if available – could provide testimony. Increasingly, though, the rise of technology enables greater public accountability throughout the enforcement process.
Specifically, Axon’s police body cameras will likely continue to play a key role, primarily to protect officers on the front lines but also to shed light on an increasingly dangerous occupation. Stated differently, Axon may help guide the framework that a robust police force represents a baseline requirement for maintaining stability in society. It can also help correct the erroneous and injurious assumption that most police officers operate under nefarious agendas.
What’s more, demand for AXON stock continues to be robust. Since the January opener, shares gained over 20%. In the trailing year, AXON stock is up more than 140%.
Growth at a Premium Price
While the fundamentals arguably make plenty of sense for AXON stock, the financials present a somewhat slippery narrative. For those interested in Axon, they must have high conviction in the fundamental thesis. That’s because the company’s growth comes at a premium price.
At a cursory glance, it’s difficult not to get excited about AXON stock. In Q1 2023, the company posted revenue of $343 million, up nearly 34% against the year-ago tally’s $256.43 million. Against the annual backdrop, Axon rang up sales of $1.19 billion in 2022, considerably above the $863.38 million posted the year prior.
Nevertheless, investors won’t get that growth for cheap. First, AXON trades at 11.6 times trailing-12-month sales, which is extremely high. In contrast, the defense sector’s median price-to-sales ratio sits at 2.1 times.
Is AXON Stock a Buy, According to Analysts?
Turning to Wall Street, AXON stock has a Strong Buy consensus rating based on eight Buys, zero Holds, and zero Sell ratings. The average AXON price target is $252.88, implying 23.5% upside potential.
Further, on TipRanks, AXON stock has a ‘Perfect 10’ Smart Score rating. This indicates strong potential for the stock to outperform the broader market.
The Takeaway: AXON Stock Should Rise to Meet Critical Demand
Although it’s important for society to recognize the imbalances of law enforcement, particularly in disenfranchised communities, lax enforcement has proven to be a quantifiable disaster. To address this delicate situation, Axon Enterprise may help bring about holistic accountability. Over time, this initiative may bolster AXON stock.
