Axon Enterprise: A Company on the Rise with Promising Future Growth

A stock split signals confidence among investors. Share prices tend to rise before and after this event, showcasing companies that are worth watching. A stock split usually happens after significant price increases, which typically don’t occur with low-performing companies.

Over the past two decades, Axon Enterprise (NASDAQ: AXON) has experienced remarkable growth, with its shares rising by 1,780%—an annualized growth rate of 15.8%. This outstanding performance makes Axon a prime candidate for a stock split in 2025.

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Additionally, Wall Street analysts are very optimistic about Axon. Among the 15 analysts who track the company, 100% have given it a buy rating—the highest proportion of buy ratings in the S&P 500 according to FactSet Research.

Axon’s Diverse Role in Public Safety

Axon operates primarily within the public safety sector. Initially founded as Taser International, the company is well-known for producing conducted energy devices branded as Tasers. While it still leads in this arena, Axon has broadened its offerings to include sensors and software:

• Sensors: The company produces body cameras, in-car cameras, and drone-mounted cameras that capture audio and video footage. These devices relay footage and location data back to dispatchers and law enforcement leaders. Axon’s sensor technology is designed to work seamlessly with its software products.
• Software: Axon’s suite includes Axon Evidence, which manages digital evidence, Axon Records for efficient reporting, and Axon Respond, providing real-time situational insights.

Although Axon competes with companies like Motorola and Oracle in the sensors and software markets, it benefits from strong existing relationships with many U.S. law enforcement agencies that use its Tasers. This has allowed Axon to lead in body-worn cameras and digital evidence management.

However, Axon has many growth opportunities ahead. Its total revenue rose 32% to $1.9 billion in the last four quarters, yet this accounts for less than 3% of the estimated $77 billion market potential. Growth areas include federal law enforcement and international markets.

Innovating with Artificial Intelligence

Axon has embraced artificial intelligence (AI) to enhance its products. The digital evidence management software employs AI for transcription and redaction of audio and video files. Additionally, Axon Fleet cameras can rapidly scan license plates across multiple lanes of traffic and alert officers if a match is found on a hotlist.

The recently launched Draft One is generative AI software designed to assist in writing police reports based on body camera footage. Introduced in April 2024, it quickly gained a $100 million revenue pipeline, setting a record for the company. CEO Rick Smith mentioned to analysts that “the customer response to Draft One is better than anything I’ve seen.”

Image source: Getty Images.

Valuation Insights on Axon’s Stock

In conclusion, Axon holds a solid competitive edge and has numerous avenues for growth. The company is advancing by launching new products, entering new markets, and expanding geographically.

That said, Axon’s stock trades at 120 times adjusted earnings, a high multiple given Wall Street’s projection of only a 21% annual earnings increase through 2025. Despite this, cautious investors might still want to consider acquiring a small stake in Axon today.

Over the past 12 quarters, Axon has reported earnings exceeding consensus estimates, averaging a 34% beat in the last six quarters. This trend could lead to faster-than-expected growth, potentially making the current stock valuation more attractive in hindsight.

Is Axon Enterprise a Smart Investment for $1,000?

Before purchasing stock in Axon Enterprise, it’s essential to consider this:

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Trevor Jennewine has positions in Axon Enterprise. The Motley Fool has positions in and recommends Axon Enterprise, FactSet Research Systems, and Oracle. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.