In the last five years, Meta Platforms (NASDAQ: META) and Axon Enterprise (NASDAQ: AXON) have experienced remarkable share price growth, climbing by 212% and 730% respectively. In contrast, the S&P 500 (SNPINDEX: ^GSPC) has yielded a return of just 91% over the same timeframe. Both companies are on the radar for potential stock splits, a consideration that appears secondary to their overall strong market positions.
The critical factor for investors is that Meta Platforms and Axon have established formidable competitive advantages in their sectors. Their capability to deliver returns that outpace the market suggests that success could persist as they direct investments toward artificial intelligence products. Wall Street analysts largely maintain a positive outlook for both companies.
- Among 71 analysts tracking Meta Platforms, 85% classify the stock as a buy.
- A strong 93% of the 15 analysts monitoring Axon Enterprise also endorse it as a buy.
Here’s what potential investors should take into account when considering these stocks.
1. Meta Platforms
Meta Platforms oversees three of the world’s four leading social media networks: Facebook, Instagram, and WhatsApp, alongside Messenger, which ranks as the seventh-most visited platform. Each service boasts over 1 billion monthly active users, collectively attracting over 3 billion unique visitors daily.
On any given day, Meta engages nearly 40% of the global population, generating valuable interaction data that allows advertisers to present relevant content to users. This efficiency has positioned Meta as the second-largest ad tech firm globally, trailing only behind Alphabet‘s Google. The company plans to leverage artificial intelligence (AI) to enhance user engagement and improve advertising effectiveness.
In its latest financial report for the third quarter, Meta Platforms surpassed revenue estimates, reporting a 19% increase to $40.6 billion and a 37% rise in GAAP net income to $6.03 per diluted share. CEO Mark Zuckerberg remarked, “We had a good quarter driven by AI progress across our apps and business.”
Significantly, user engagement grew by 8% for Facebook and 6% for Instagram year-to-date, largely due to AI-driven recommendations. Zuckerberg also noted optimism surrounding Meta’s new conversational assistant, Meta AI, which he believes may become the most utilized AI assistant by year-end.
Market expectations suggest that Meta Platforms’ earnings will grow at an annual rate of 23% over the next three years. This forecast indicates that the current valuation of 29 times earnings is reasonable. Investors should consider establishing a small position in the stock today, independent of any potential stock split soon.
2. Axon Enterprise
Axon specializes in public safety solutions, catering to law enforcement, federal agencies, and commercial clients. While it is best known for its Taser devices, Axon also provides essential tools such as body-worn cameras and in-car dash cameras, all of which integrate with its software for digital evidence management, report writing, and real-time operations.
The company is recognized as a leader in the conducted energy device market, with its brand name Taser closely associated with this product category. Over the years, Axon has cultivated strong relationships with numerous state and local law enforcement agencies, reinforcing its dominance in body-worn cameras and digital evidence management.
A recent advancement from Axon is Draft One, a generative AI service that helps automate the process of drafting police reports using video data from body-worn cameras. CEO Rick Smith commented on the favorable customer reception, stating, “Our customers’ response to Draft One is better than anything I’ve seen.” Smith anticipates that Axon will take the lead in generative AI applications within public safety.
For the second quarter, Axon reported a 34% revenue increase, reaching $504 million. Non-GAAP net income grew by 9% to $1.20 per diluted share. A notable concern is the 41% rise in operating expenses, chiefly linked to increased stock-based compensation, which investors should monitor keenly, particularly as Axon still has 3.6 million shares under its equity incentive program.
Looking ahead, Wall Street predicts Axon’s adjusted earnings will grow at 21% annually through 2025. Although this projection suggests an attractive growth trajectory, a current valuation of 98 times adjusted earnings appears high. While Axon remains an exceptional company with robust growth prospects, potential investors may want to await more favorable pricing before committing to purchases, even with strong analyst ratings.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Axon Enterprise. The Motley Fool has positions in and recommends Alphabet, Axon Enterprise, and Meta Platforms. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
