Shares of Axon Enterprise (NASDAQ: AXON) had been hovering once more just lately after the main regulation enforcement know-how firm delivered one other sturdy earnings report.
Axon, which makes TASER stun weapons and physique cameras, posted its third straight yr with income progress of larger than 30%.
Within the fourth quarter, income jumped 34% to $575.1 million, beating the consensus of $566 million, and its margins continued to develop because it earned extra money from its high-margin software program enterprise. Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) jumped 56% to $142 million. Typically accepted accounting ideas (GAAP) earnings per share of $1.67 topped estimates of $1.40.
Whereas these numbers had been spectacular, wanting past the headlines gives the most effective proof for why Axon can proceed to shine. Listed below are three the explanation why the inventory can maintain climbing larger.
Picture supply: Axon.
Bookings are key for any software program firm, as they seem to be a main indicator of income. Software program firms promote subscriptions, reserving contracts up entrance, after which document the ensuing income month-to-month over the size of the contract.
In 2024, Axon recorded greater than $5 billion in annual bookings, bringing contracted bookings to $10.1 billion. It introduced in income of $2.1 billion in 2024, so its pipeline of income represents practically 5 years’ value of complete income proper now, which is big, and reveals that the corporate has booked high-value, long-term contracts.
Axon is a mixed {hardware} and software program enterprise. It now has annual recurring income of $1 billion, which is primarily from its cloud merchandise, that means that its bookings backlog represents 10 years of recurring income on the present stage. That is an amazing indicator of future progress and future demand.
Axon’s energy in regulation enforcement is obvious because it’s constructed a stable buyer base throughout state and native regulation enforcement, federal companies, and worldwide regulation enforcement.
Nevertheless, the corporate sees a chance to develop past regulation enforcement into the non-public sector, tapping into the enterprise market.
In 2024, the corporate mentioned it recorded its largest deal ever, coming from an enterprise buyer. Axon did not title the shopper, however it did say on the earnings name that it was a worldwide logistics supplier. That may very well be an organization like FedEx or UPS on the lookout for physique cameras to provide its drivers a straightforward option to document package deal drop-offs and maintain a document of some other incident the driving force may face in the middle of their day. Axon touted the curiosity from the enterprise sector in utilizing its merchandise for frontline employees.
That deal reveals the chance that Axon has in tapping untraditional markets because the utility of physique cameras goes past regulation enforcement. For example, safety firms would doubtless profit from them, as would different drivers and transportation employees, and plenty of others who work together with most people and wish to have a digital document in case there is a want for it.
Axon’s mission is to guard life. It is an amazing mission assertion because it clearly states the corporate’s goal and prevents the corporate from being too targeted on a single product like Taser.
It leaves room for the corporate to develop into new merchandise, and it is carried out precisely that with instruments like its new synthetic intelligence (AI) options similar to Draft One, which auto-transcribes footage for physique cameras to make police stories.
Axon estimates its addressable market yearly and now believes it operates in a total addressable market (TAM) of $129 billion, based mostly on increasing alternatives in worldwide governments, the enterprise market, and with AI.
Axon has solely penetrated 2% of that market at present, and even in U.S. state and native governments, it believes its TAM penetration is simply 15%, indicating a big progress alternative nonetheless stays.
Axon will proceed to innovate with new know-how. Prices for issues like cloud storage and AI will doubtless proceed to return down. The corporate will be capable of remedy much more issues for its clients sooner or later because it brings new firms into the fold by way of acquisitions and rolls out new applied sciences.
The long run remains to be brilliant for Axon Enterprise, and the inventory appears to be like like an amazing purchase after pulling again from its peak.
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Jeremy Bowman has positions in Axon Enterprise. The Motley Idiot has positions in and recommends Axon Enterprise and FedEx. The Motley Idiot recommends United Parcel Service. The Motley Idiot has a disclosure policy.
