Axon stock is Friday's IBD Stock Of The Day as the supplier of Tasers, body cameras and cloud-based software to law enforcement continues to stairstep higher, touching a record high intraday.
Tech stocks are leading the market higher as the bank blowup forces the Federal Reserve to take it easier on interest-rate hikes. And Axon stock seems to check all the boxes.
On Friday, the IBD Leaderboard portfolio of elite stocks added a position in Axon Enterprise. Axon stock also is part of the flagship IBD 50 list.
Taser 10 Boosts Sales Momentum
Its new Taser 10 weapon unveiled in January nearly doubles its range to 45 feet. Additionally, it offers dramatic improvements in accuracy and effectiveness. During the Q4 earnings call on March 2, Axon CEO Rick Smith said he's "never seen demand this strong in a new Taser launch."
Smith recounted conversations with a major county sheriff and big city police chief. They said the Taser 10, with its enhanced capabilities, could have alleviated most of the situations they've faced this year in which police fired their weapons.
Even before the Taser 10, Axon had seen a revenue-growth acceleration. Its Q4 sales shot up 54.5% to $336.1 million. Profit margins also are widening as Axon puts a period of heavy investment behind it and efforts to tap federal government and international markets pay off.
The company expects revenue of at least $1.43 billion, or 20% growth, in 2023. Analysts had been forecasting $1.38 billion. Axon said it's targeting a gross margin of 20% vs. 19.5% in 2022. By 2025, Axon says it is aiming for revenue of at least $2 billion and adjusted EBITDA margins of 25%. Long term, Axon sees a market potential north of $50 billion.
Axon's Flush Customers
Axon's products are key for law enforcement, helping to build public trust. Meanwhile, cloud-based software for managing police evidence, records and communications makes officers more productive. One key metric gives an idea of how indispensable police departments see its Axon contracts. In Q4, Axon saw 121% net revenue retention. That means that expanded contracts far more than offset minimal customer attrition.
While markets are cheering the coming end of Fed rate hikes, the economy still likely faces a brush with recession, if not an actual recession. Yet Axon's state and local government customers are pretty flush at the moment, so there's little near-term risk to demand for Axon products due to an economic downturn.
AXON Stock
Axon stock rose 3.3% to 224.85 in Friday market action. Intraday, Axon stock hit 227.56, eclipsing its prior all-time high of 226 on March 8.
The brief consolidation since March 8, tracking a rising 21-day line, is not far above a prior proper base that was decisively cleared on March 1. Investors could use 221.79, above the March 21 high, or 226.10 as a place to start or add to an Axon stock position.
Axon stock has been following something of a stairstep pattern higher since last fall, with successive breakouts. Despite Axon stock's big run, though, it isn't especially extended, up just 10% from its 50-day moving average.
Axon stock's relative strength line, the blue line in IBD charts that tracks a stock's performance vs. the S&P 500, is right near a record high, confirming its market leadership.
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