Taser maker Axon Enterprise shares are up for an eighth-straight year. Here's what's driving the gains
One stock that's bucking all macro concerns in 2023, and has been for years, is Taser maker Axon Enterprise . Axon shares are up nearly 30% this year, putting them on track for their eighth consecutive annual gain. Last year, the stock climbed 5.7% — while the S & P 500 dropped 19%. The stock also showed its resiliency last week, eking out a small gain despite the market volatility sparked from a global banking crisis. Even more impressive, the stock posted losses just twice in the past 15 years. That notable streak comes as the company expands beyond its flagship Taser weapon into a suite of offerings including body cameras. This comes at the same time that public accountability of police officers gathers momentum. "What they've essentially done is they've parlayed a single product, the Taser, into a multiproduct ecosystem family," said Joshua Reilly, senior analyst at Needham. AXON mountain 2013-03-15 Axon Enterprise shares in past 10 years The company has a confident outlook for its business, saying last month it forecast more than $2 billion in revenue in 2025, or sustained annualized average revenue growth greater than 20%. And, Reilly expects that the latest update to the Taser itself will drive a new upgrade cycle — similar to the ones seen when Apple releases a new iPhone. "It's a similar dynamic," Reilly added. "That's going to help them both replace legacy models of the Taser that are out in the field today, but also expand the opportunity for Taser both domestically and internationally." Expanding ecosystem Axon has been expanding its business for years as it rolls out an increasingly sophisticated suite of products for law enforcement that includes body cameras, in-vehicle cameras and cloud software solutions. While other smaller firms offer these products, Axon has been snatching up market share as it leverages its relationship with law enforcement. The Taser maker has a customer relationship with roughly 17,000 out 18,000 U.S. law enforcement agencies, according to a note this month from Goldman Sachs . The firm also has dedicated sales representatives for 1,200 for the largest agencies, which represent 70% of law enforcement patrol officers. That body camera is also "extremely important" for Axon amid greater calls for transparency in law enforcement departments, especially as it helps contribute high-quality footage surrounding an incident, Needham's Reilly said. Axon has quickly expanded sales. Over the past five years, net sales at the company jumped to $1.189 billion in 2022, up from $343.8 million in 2017. At year-end 2023, those sales are expected to grow to at least $1.43 billion, according to Axon. To be sure, a slowdown in the product cycle down the road could hurt the stock. However, Needham's Reilly said the firm is focusing on reducing the dilution its stock-based compensation and raising the free cash flow of the business. Both are attractive moves for investors. And, Goldman Sachs' analyst Michael Ng, who initiated coverage of the stock this month with a buy rating, says shares have more than 20% upside from Friday's close. Public accountability The latest version of the Taser that launched in January is purported to have more safety features and be more effective. Among other changes, the Taser 10 has a lower voltage than its predecessor. It also allows users to target probes individually, instead of having to aim two simultaneously on a person. In some countries, especially in those with no guns available to the public, those changes could spur officers to move to tasers as their primary weapon, instead of handguns, according to a FactSet transcript of Axon Enterprise CEO Patrick Smith in the firm's fourth-quarter conference call earlier this month. "This might be the first version of the Taser where some countries in some regions experiment with officers only carrying a taser — and not a handgun and a taser," Needham's Reilly said. "Making the Taser safer and a more effective replacement for the gun is extremely important," Reilly said. "Because if officers have confidence that the Taser will bring you down — which I think they will have more confidence with the Taser 10 than any Taser in history — that is gonna lead to fewer overall police shootings at the end of the day," he said.
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