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Axon Surges 97.5% in 6 Months: Is the Stock Still Worth Buying?
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Axon Enterprise, Inc.’s (AXON - Free Report) investors have been witnessing some short-term gains from the stock of late. Shares of the public safety technology solution provider have surged 97.5% in the past six months, outpacing the industry and S&P 500 Composite’s growth of 18.3% and 12.4%, respectively. The company has also outperformed other industry players like Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) and Teledyne Technologies Incorporated (TDY - Free Report) , which have returned 51.2% and 21.6%, respectively, over the said time frame.
AXON Stock’s Six-Month Price Performance
Image Source: Zacks Investment Research
Closing at $610.32 on Friday, the stock is trading below its 52-week high of $698.67 but significantly higher than its 52-week low of $247.04. The stock is trading close to its 50-day moving average and way above its 200-day moving average, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.
AXON Shares’ 50-Day and 200-Day SMA
Image Source: Zacks Investment Research
Factors Favoring the Company
The strongest driver of Axon’s business at the moment is solid momentum in the TASER segment. Strong demand for TASER devices and virtual reality training services has been supporting the segment’s growth of late. In the first nine months of 2024, segmental revenues increased 32.1% year over year. The company continues to witness growing popularity for its next generation TASER 10 products, whose shipment began in first-quarter 2023. Also, growth in cartridge revenues, driven by higher adoption of the TASER products, has been driving the segment’s performance.
The addition of new users and associated devices to the Axon network remains growth catalyst for the Software & Sensors segment. An increase in the aggregate number of users and average revenue per user, driven by increased adoption of software applications, is driving Axon Evidence and cloud services’ growth within the segment. Revenues from the segment increased 34.2% in the first nine months of 2024.
Axon introduced its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera is generating significant demand, thus bolstering the segment’s growth.
Axon’s investments in newer areas within the software business, like AI products, real-time operations, drones and robotics, bode well for growth. This, along with the strength in the TASER 10 device, led the company to provide bullish guidance for 2024. The company expects revenues of $2.07 billion, indicating growth of approximately 32% on a year-over-year basis. Axon expects adjusted EBITDA of $510 million in 2024 with a continued margin expansion from 2023.
Axon remains focused on strengthening business and expanding product offerings through acquisitions. For instance, in October 2024, the company acquired Dedrone, a global leader in airspace security. The inclusion of Dedrone’s advanced airspace technology boosted Axon's Drone as First Responder (DFR) offerings. Also, in January 2024, the company acquired Fusus, a leader in real-time crime center technology. The buyout combined Fusus’ real-time situational awareness expertise with Axon's innovative public safety technology, thereby enhancing safety and security for the latter’s customers in public places.
Better-Than-Industry Returns
Axon’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 20.42%, higher than the industry’s 10.93%. This reflects the company’s efficient usage of shareholder funds.
Image Source: Zacks Investment Research
Return on assets is 10.29%, also ahead of the industry’s 3.85%, indicating that the company has been utilizing its assets efficiently to generate returns.
Image Source: Zacks Investment Research
AXON’s Earnings Estimate Revision
The company’s earnings estimates for 2024 (results awaited) have remained stable at $5.29 per share over the past 60 days. Earnings estimates for 2025 have inched up 0.3% to $6.50 per share.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Stretched Valuation Remains an Overhang
AXON’s lofty valuation remains a concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 92.48X, much higher than the industry average of 38.22X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. Also, the stock is overvalued compared with its peer, Leonardo DRS, Inc. (DRS - Free Report) , which is trading at 34.09X.
Our Final Take
Robust momentum across Axon’s TASER and Software & Sensors segments, along with its investments in AI products, drones and robotics, positions it favorably for impressive growth in the quarters ahead. The company’s strategic acquisitions and collaborations with other companies to expand product offerings should also support its top-line performance.
Image: Bigstock
Axon Surges 97.5% in 6 Months: Is the Stock Still Worth Buying?
Axon Enterprise, Inc.’s (AXON - Free Report) investors have been witnessing some short-term gains from the stock of late. Shares of the public safety technology solution provider have surged 97.5% in the past six months, outpacing the industry and S&P 500 Composite’s growth of 18.3% and 12.4%, respectively. The company has also outperformed other industry players like Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) and Teledyne Technologies Incorporated (TDY - Free Report) , which have returned 51.2% and 21.6%, respectively, over the said time frame.
AXON Stock’s Six-Month Price Performance
Image Source: Zacks Investment Research
Closing at $610.32 on Friday, the stock is trading below its 52-week high of $698.67 but significantly higher than its 52-week low of $247.04. The stock is trading close to its 50-day moving average and way above its 200-day moving average, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.
AXON Shares’ 50-Day and 200-Day SMA
Image Source: Zacks Investment Research
Factors Favoring the Company
The strongest driver of Axon’s business at the moment is solid momentum in the TASER segment. Strong demand for TASER devices and virtual reality training services has been supporting the segment’s growth of late. In the first nine months of 2024, segmental revenues increased 32.1% year over year. The company continues to witness growing popularity for its next generation TASER 10 products, whose shipment began in first-quarter 2023. Also, growth in cartridge revenues, driven by higher adoption of the TASER products, has been driving the segment’s performance.
The addition of new users and associated devices to the Axon network remains growth catalyst for the Software & Sensors segment. An increase in the aggregate number of users and average revenue per user, driven by increased adoption of software applications, is driving Axon Evidence and cloud services’ growth within the segment. Revenues from the segment increased 34.2% in the first nine months of 2024.
Axon introduced its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera is generating significant demand, thus bolstering the segment’s growth.
Axon’s investments in newer areas within the software business, like AI products, real-time operations, drones and robotics, bode well for growth. This, along with the strength in the TASER 10 device, led the company to provide bullish guidance for 2024. The company expects revenues of $2.07 billion, indicating growth of approximately 32% on a year-over-year basis. Axon expects adjusted EBITDA of $510 million in 2024 with a continued margin expansion from 2023.
Axon remains focused on strengthening business and expanding product offerings through acquisitions. For instance, in October 2024, the company acquired Dedrone, a global leader in airspace security. The inclusion of Dedrone’s advanced airspace technology boosted Axon's Drone as First Responder (DFR) offerings. Also, in January 2024, the company acquired Fusus, a leader in real-time crime center technology. The buyout combined Fusus’ real-time situational awareness expertise with Axon's innovative public safety technology, thereby enhancing safety and security for the latter’s customers in public places.
Better-Than-Industry Returns
Axon’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 20.42%, higher than the industry’s 10.93%. This reflects the company’s efficient usage of shareholder funds.
Image Source: Zacks Investment Research
Return on assets is 10.29%, also ahead of the industry’s 3.85%, indicating that the company has been utilizing its assets efficiently to generate returns.
Image Source: Zacks Investment Research
AXON’s Earnings Estimate Revision
The company’s earnings estimates for 2024 (results awaited) have remained stable at $5.29 per share over the past 60 days. Earnings estimates for 2025 have inched up 0.3% to $6.50 per share.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Stretched Valuation Remains an Overhang
AXON’s lofty valuation remains a concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 92.48X, much higher than the industry average of 38.22X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. Also, the stock is overvalued compared with its peer, Leonardo DRS, Inc. (DRS - Free Report) , which is trading at 34.09X.
Our Final Take
Robust momentum across Axon’s TASER and Software & Sensors segments, along with its investments in AI products, drones and robotics, positions it favorably for impressive growth in the quarters ahead. The company’s strategic acquisitions and collaborations with other companies to expand product offerings should also support its top-line performance.
Despite its expensive valuation, positive analyst sentiment and robust growth prospects indicate it is the right time for potential investors to bet on this Zacks Rank #2 (Buy) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.