In February, Axon Enterprise (AXON 4.03%) reported full-year 2024 income of $2.1 billion, marking its third consecutive yr with over 30% top-line progress. The inventory soared over 15% on the earnings information, however shares have been unstable together with the remainder of the market previously two months.
That stated, whereas the Nasdaq Composite is down double digits yr so far, Axon has proven resilience within the face of macroeconomic uncertainty with only a 2% decline. That ought to already be sufficient to perk up traders’ ears, however the inventory’s nearly 400% return previously three years is making it inconceivable to disregard.
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Constructing merchandise to guard life
Axon isn’t just any tech firm. Greatest identified for its less-than-lethal TASER, the corporate now provides legislation enforcement companies and different clients with an entire platform revolving round public security. Past TASER, there may be {hardware} like physique cameras and drones. And on the software program aspect, there may be Axon Proof (a cloud-based proof administration platform) and Axon Fusus (a knowledge analytics service), amongst others, with synthetic intelligence (AI) enjoying an more and more vital function within the platform as properly.
Collectively, these merchandise goal to assist officers reply quicker to emergencies, enhance decision-making, and enhance their operational effectivity. This platform method has diversified the corporate’s income streams. In 2021, TASER made up simply over 50% of income. Three years later, TASER income grew 87% to $819 million, however its share of the highest line fell to 39% with Axon Cloud & Companies on the verge of eclipsing that section to change into the corporate’s largest enterprise.
It is also vital to notice Axon has $10.1 billion of future contracted bookings and $1.0 billion of annual recurring income, giving traders ample monetary visibility for the following few years.
A transparent path to progress within the coming years
In contrast to lots of its high-growth tech trade friends, Axon has paired its 30%-plus income progress with sturdy profitability — non-GAAP internet earnings nearly tripled from $159 million in 2021 to $466 million in 2024.
Whereas spectacular, that is simply the tip of the iceberg for Axon, due to its distinctive place on the intersection of public security, cloud software program, and AI. In response to the corporate, it has a complete addressable market (TAM) of $129 billion, of which legislation enforcement use circumstances account for 50%, and the remaining is from non-public enterprises and the civilian market. Based mostly on this estimate, Axon has captured lower than 2% of the chance.
In addition to its enormous TAM, Axon’s distinctive enterprise mannequin offers an excellent basis for progress. It $1.0 billion of recurring income is high-margin, sticky, and scalable, giving the corporate loads of leverage for future progress. Right here, it is important to emphasise that half of its TAM is for services and products which can be bought are on a per-user foundation, so any enhance within the person base has direct advantages to Axon’s enterprise.
Different key progress drivers embody the fixed improve of merchandise and new classes — reminiscent of drones and robotics — due to speedy technological growth. Particularly, the development in AI gives loads of alternatives for Axon to reinforce its choices, each to front-line officers and in its backend processing. And public security is just not a home problem, so Axon can leverage its know-how to develop its abroad enterprise.
In brief, there are many levers that Axon can pull to maintain its progress machine spinning in years to come back.
What it means for traders
Axon Enterprise has change into probably the most compelling progress tales in recent times.
Whereas TASERs and physique cameras are its most seen, well-known choices, the true engine of progress lies in Axon’s transformation right into a digital platform with long-term potential for recurring income progress. And on this unstable market surroundings, traders ought to at the very least hold the corporate on their watch record.
Lawrence Nga has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Axon Enterprise. The Motley Idiot has a disclosure coverage.
