Axon Enterprise, Thursday's pick for IBD 50 Stocks to Watch, is nearing new highs as it prepares to expand on an already tremendous two-year run. And two analysts just gave glowing reports on the company, with one calling it the "Apple of safety."
Analysts at Jefferies and BofA Securities initiated coverage on the stock with buy recommendations Wednesday. The company was first known for its Taser stun guns. Now it also has expanded into body cameras and other digital evidence tools for law enforcement.
One of its innovations is Draft One, software that uses body-camera audio to help write police reports.
"We believe the Street underestimates their opportunity with their new Draft One software offering — a key element of our thesis," wrote Jefferies analyst George Notter.
Draft One could contribute $250 million to $500 million in annual recurring revenue, or ARR, Notter says. That's a significant sum relative to Axon's current ARR of $825 million, he noted. The new artificial intelligence-based software reduces report writing times by 67%. The analyst also sees growth ahead with higher penetration in law enforcement, other new technologies, and higher-end bundles.
Axon: The 'Apple Of Safety'
BofA Securities analysts said in a research note that Axon's sensors and software will lead future growth. That should come as more officers are added to the Officer Safety Plan subscription model, fueling the company's ARR.
"The combination of the cyclical hardware with integrated software tools makes Axon the Apple of safety, in our view," the analysts wrote. They see similarities with tech giant Apple as its ARR and subscription model became better appreciated by the market and led to growth.
Stable police budget growth, early entrance into new markets such as drones, and other trends set up the company's growth, BofA analysts believe. "We view their intense focus on R&D as creating an opportunity to displace incumbents," the brokerage said.
Jefferies placed a 385 price target on Axon stock and BofA gave a target of 380.
Axon Stock Near Buy Point
The stock traded around 318 Thursday morning, as it forms a cup base with a 329.87 buy point. Shares twice attempted to clear the 330 price level, only to be turned back. So watch for a strong move above it.
The July 9 high of 306.35 acts as an aggressive entry for Axon stock. Shares rallied past that level Monday following the attempted assassination of former President Donald Trump. Axon's technology may help avoid communication breakdowns like the ones that kept authorities from stopping the shooting. Plus, many see a new Trump administration as generally favorable for law enforcement.
The stock has more than tripled since it bottomed about two years ago. But while its advance is getting long in the tooth, the stock's 17% decline in May undercut a previous chart pattern. Technically, that resets the base count and sets up the stock to potentially add to its big advance.
Analysts expect second-quarter earnings of $1.02 per share, an 8% decline year over year, according to FactSet. Sales should rise more than 27% to $477.9 million. Axon stock has a three-year EPS growth rate of 31% and three-year sales growth rate of 32%.
