Ever since moving into the political arena, former President Donald Trump has long supported a strict law-and-order protocol. That message naturally resonates with Trump’s core conservative voting base, which could help Axon Enterprise (AXON). With the recent shooting of the Republican candidate breaking news around the world, the company’s security products have arguably never been more relevant. Therefore, I am bullish on AXON stock.
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Financial Considerations Present a Tricky Case for AXON Stock
Before diving into the fundamentals undergirding AXON stock, it’s well worth considering the financial backdrop. Humans generally tend to look at price first and then decide whether the product or service is right for them. It’s unavoidable, so here’s the situation.
AXON stock trades at around $320 per share. Psychologically, that’s not exactly “cheap,” and when considering the underlying multiples, the assessment doesn’t get much better. For example, shares trade at 93x trailing-year earnings. It sounds like a lot because it is.
Frankly, it’s difficult to classify Axon Enterprise neatly. Primarily, the company is best known for developing the Taser, a non-lethal projectile system that can temporarily disable an assailant. It’s also popular among law-enforcement agencies for manufacturing body cameras. This way, police officers who find themselves in unfortunate violent incidents can protect their reputation and livelihood.
However, many, if not most, resources peg AXON stock as an Aerospace & Defense investment. If so, the average earnings multiple of the sector sits at only 28.32x. Circumstances don’t get much better when you consider the top line. The market prices AXON at 13.9x trailing-year revenue. In contrast, the sector runs an average multiple of only 1.8x.
So, why bother acquiring AXON stock? One of the key factors centers on analyst projections. In particular, Wall Street experts are calling for earnings per share to hit $4.49 by year’s end. If so, that would imply an 8.45% increase from last year’s print of $4.14 per share. In the following year, EPS might land at $5.68, suggesting a 26.5% boost from projected 2024 earnings.
On the top line, analysts believe that revenue may rise to $1.98 billion, implying a 26.5% lift from 2023’s haul of $1.56 billion. And in the following year, experts are eyeballing sales of $2.41 billion. If that projection holds true, it would mean a near 22% increase from 2024’s forecasted top line.
Projections, schmections, some of you might be saying. Here’s the thing, though: Axon has been resoundingly delivering the goods. In the past four quarters, the company’s average EPS came out to $1.10. In contrast, analysts were only targeting 79 cents. This performance yielded an earnings surprise of 41.83%.
Look at the revenue history that TipRanks provided, going back to the first quarter of 2022. Every single quarter, Axon’s sales tally beat the expected analyst target.
Now, let’s not kid ourselves. Even at Fiscal 2024’s high-end sales target of $2.02 billion, AXON stock would be overvalued. It would be trading at a projected revenue multiple of over 11x (assuming a shares count of 75.47 million).
That’s still high relative to the Defense industry. However, this is an impressive enterprise that stands poised to become even stronger.
Trump Shooting Should Accelerate the Axon Narrative
Related to the law-and-order message, Trump has long portrayed America as a nation mired in violence. He seemingly takes every opportunity to blast Democrats for being soft on crime. The fact that this messaging continued into the present day is no surprise to anyone. And frankly, rising crime rates impacting certain business categories afford at least some credibility to the talking points.
What’s more, Trump himself now realizes the importance of his new-sheriff-in-town battle cry. In a shocking incident Saturday, a gunman opened fire on Trump at a Pennsylvania rally, injuring the former president. One spectator was critically injured, while another was killed. Also, the suspected gunman is dead. The Secret Service is investigating the matter as an assassination attempt.
Of course, AXON stock isn’t directly related to this horrific and cowardly act. However, the incident highlights the need for more resources to be allocated to the men and women in law enforcement. With Axon’s systems, the company provides both acute-threat solutions as well as investigative tools.
Given that the company was already on a consistent winning streak, this latest shocking news should embolden the bullish case. Yes, technically speaking, AXON stock is overvalued, but make no mistake: its relevance is likely to accelerate, perhaps dramatically.
Is Axon Enterprise Stock a Buy, According to Analysts?
Turning to Wall Street, AXON stock has a Strong Buy consensus rating based on eight Buys, one Hold, and zero Sell ratings. The average AXON stock price target is $363.00, implying 13.6% upside potential.
The Takeaway: A Hot Play in AXON Stock May Get Even Hotter
Former president Donald Trump has long portrayed himself as a sheriff that will clean up this town – this town being the U.S. With rising crime statistics backing up the narrative, this messaging has resonated with conservative voters. More than likely, the assassination attempt of Trump highlights the need for an even more draconian security protocol, which should be beneficial for Axon Enterprise. Sure, AXON stock is technically overvalued. However, the fundamentals will likely drive this hot play to even greater heights.
