Axon Enterprise (AXON) Displays Bright Prospects Amid Risks
Axon Enterprise, Inc. AXON has been witnessing persistent strength in its TASER segment, driven by growing orders for devices and cartridge products. Stable demand for virtual reality training services has also been supporting the segment’s growth. Also, solid momentum in Axon Evidence and cloud services, driven by an increase in the number of users and average revenue per user, is driving the Software & Sensors segment’s growth. For 2024, it expects revenues in the range of $1.94-$1.99 billion, indicating growth of 26% from the year-ago levels at the midpoint.
The company’s investments in product innovations, automation and manufacturing efficiency are expected to drive growth. For instance, AXON launched its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera has been generating significant demand, thus bolstering the company’s growth.
Management remains focused on acquiring businesses to gain access to new customers, regions and product lines. In January 2024, it acquired Fusus, a leader in real-time crime center technology. The buyout will combine Fusus’ real-time situational awareness expertise with Axon Enterprise's innovative public safety technology, thereby enhancing safety and security for its customers in public places.
Also, the acquisition of Sky-Hero (July 2023), an innovator in drones and ground-based vehicles, expanded Axon Air's portfolio. The buyout expanded Axon Enterprise’s capabilities to protect life and helped the company move ahead in its moonshot goal.
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In the past three months, this Zacks Rank #3 (Hold) company has gained 25.4% compared with the industry’s 25.2% growth.
Despite the positives, AXON has been grappling with escalating costs and expenses over time. In 2023, the company’s cost of sales soared 31.8% year over year. Also, in the first quarter of 2024, the metric climbed 44.5% year over year. It incurred high expenses due to business integration activities and an increase in raw material costs.
AXON’s extensive presence across international markets also exposes it to risks from negative foreign currency translations. A strengthening U.S. dollar might adversely impact its profit margins in locations outside the United States.
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