Reasons to Add Axon Enterprise (AXON) to Your Portfolio Now
Axon Enterprise, Inc. AXON is well poised for growth courtesy of strength across its end markets, solid demand environment, strategic acquisitions and improvement in manufacturing efficiency. The company remains focused on investing in growth opportunities and solidifying its long-term market position.
The company, which currently carries a Zacks Rank #2 (Buy), has a market capitalization of $19.2 billion. Over the past six months, it has gained 25.4% against the industry’s decline of 3.7%.
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Let’s delve into the factors that have been aiding the company for a while now.
Business Strength: Axon has been benefiting from strong demand for TASER devices and cartridges. Robust sales from virtual reality training services have been driving the TASER segment. Driven by strength across its end markets, the segment’s revenues increased 14.3% year over year in the first nine months of 2023. In January 2023, the company launched its next-generation energy device, TASER 10, which has a 10-probe capacity and a maximum range of 45 feet. Shipment of this product began earlier this year and solid customer response is contributing to the segment’s growth.
The addition of new users and associated devices to the AXON network is aiding the Software & Sensors segment. After witnessing a 54.4% jump in revenues in 2022, revenues from the segment surged 48.2% year over year in the first nine months of 2023. Strong momentum in Axon Evidence and cloud services, driven by an increase in the aggregate number of users, average revenue per user and software add-ons, are also driving the segment’s growth.
Solid 2023 View: With the strong initial response for Axon Body 4 camera and TASER 10 device, Axon has raised its 2023 guidance. The company currently expects revenues of $1.55 billion, higher than the $1.44-$1.46 billion projected earlier. The guided range reflects an approximate 30% year-over-year increase. AXON expects adjusted EBITDA of $322 million in 2023 compared with $302-$306 million anticipated earlier. Adjusted EBITDA margin is expected to be 20.8% in 2023.
Acquisition Benefits: The company remains open to acquiring businesses to gain access to new customers, regions and product lines. AXON’s acquisition of Sky-Hero (July 2023), an innovator in drones and ground-based vehicles, expanded its Axon Air portfolio, which consists of the company’s drone software and hardware portfolio. The buyout is aligned with Axon’s "moonshot" goal to cut down gun-related deaths between police and the public by 50% over the next decade.
Also, the company’s investments in automation, research and development and manufacturing efficiency are anticipated to drive its margin performance in the upcoming quarters.
3 Other Promising Stocks
We have highlighted three other top-ranked stocks, namely Alarm.com ALRM, Lakeland Industries LAKE and Resideo Technologies REZI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alarm.com delivered a trailing four-quarter average earnings surprise of 35%. In the past 60 days, the Zacks Consensus Estimate for ALRM’s 2023 earnings has increased 12.4%. The stock has risen 19.6% in the past six months.
Lakeland Industries has a trailing four-quarter average earnings surprise of 38.4%. The consensus estimate for LAKE’s 2023 earnings has increased 8.6% in the past 60 days. Shares of the company have rallied 21.4% in the past six months.
Resideo Technologies delivered a trailing four-quarter average earnings surprise of 5.7%. In the past 60 days, the consensus estimate for REZI’s 2023 earnings has improved 18.4%. The stock has risen 4.5% in the past six months.
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