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Analyst: The Bullish Case For Axon Isn't Based On Taser Sales Alone

Jayson Derrick

Axon Enterprise Inc (NASDAQ: AAXN), the company best known for the Taser stun gun, continues to expand its leadership position across a "wide ecosystem" that bodes well for the stock, according to Morgan Stanley.

The Analyst

Morgan Stanley's Yuuji Anderson initiated coverage of Axon Enterprise with an Overweight rating and $75 price target.

The Thesis

Axon's Taser is used by 600,000 police officers worldwide and accounts for 41 percent of operating margins, Anderson said in the initiation note. (See the analyst's track record here.)

Investors who assume the Taser has reached peak saturation may want to reconsider, as Axon has taken many steps to expand into new market opportunities, the analyst said. For example, the 2019 release of records management software will expand Axon's total addressable market from $1.5 billion for Tasers alone to $7.5 billion, according to Morgan Stanley. 

Axon's stock price implies 7-percent long-term earnings growth, but the continued expansion into new categories should generate superior earnings growth — a vital component of Morgan Stanley's bullish thesis, Anderson said.

The company should generate a high double-digit growth rate as it continues to win market share, ramp R&D, acquire strategic assets and form compelling technology partnerships, the analyst said. 

Axon deserves credit for being the first to address challenges in the market, Anderson said: when body cameras were first introduced to the market, Axon recognized the need to minimize the significant amount of work rinvolved in storing video. The company introduced a feature to automatically upload video through WiFi to its cloud storage platform, Evidence.com.

Price Action

Shares of Axon Enterprise were trading up 1 percent at $63.82 at the time of publication Monday morning. 

Related Links:

Time For Axon's Stock To Take A 'Breather,' JPMorgan Says

Taser Offers One-Year Free Body-Cam Trial To Every Police Officer In America

Photo by jasonesbain/Wikimedia. 

Latest Ratings for AAXN

Date Firm Action From To
Jul 2018 Morgan Stanley Initiates Coverage On Overweight
Jun 2018 Baird Initiates Coverage On Neutral
Jun 2018 JP Morgan Downgrades Overweight Neutral

View More Analyst Ratings for AAXN
View the Latest Analyst Ratings

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