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Crushing It: No Axon To Grind With This Stock

Jun. 03, 2020 2:43 AM ETAxon Enterprise, Inc. (AXON)19 Comments


  • Axon is a leader in law enforcement technology with its TASER, body cameras, and software applications such as evidence.com.
  • The recent rioting has highlighted the need for technology produced by Axon.
  • Fundamentals are strong and will carry the company through this time of uncertainty.
  • My opinion is that the stock price is undervalued relative to its peers, making it a good buying opportunity.
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In my last article on Axon Enterprise Inc. (AAXN), titled "Why I Love Axon" I issued a bullish rating on the company that is an industry leader in Conducted Energy Weapons (CEW) and other law enforcement technologies. Since publication just two months ago, Axon stock is up 42% while the S&P 500 is up only 17%.

Axon stock performance since article publication

(Source: Seeking Alpha)

There are two reasons why the stock is up. The first reason was the excellent quarterly results provided in early May. The second reason is due to the recent rioting over the tragic death of George Floyd.

Axon strategic growth areas

(Source: Axon)

Stocks associated with civil unrest have benefited, along with Axon, which is now breaking out to a new all-time high, doubling since bottoming out at ~$50 in March.

(Source: Yahoo Finance/MS Paint)

I would like to point out to those not familiar with Axon, the company is transforming from a sales to a SaaS business model for their TASER lineup, body cams and evidence collection software. For the FY'2019, recurring revenue was up 49% YoY.

Business Conditions

During the Q1 2020 earnings call, the Axon CEO indicated that although there were some customers delaying orders, that business was in general strong:

To date, we are seeing mixed changes to buying habits among major US city police departments — some departments are continuing to place large orders for Axon products, and communicating gratitude that we are shipping mission critical equipment. We are seeing some agencies move to standard issue on Axon devices, to reduce sharing among officers, which has boosted orders.

A small number of agency customers have delayed their body camera programs, or postponed their subscription upgrades until unspecified later dates. Thus far, the impact of these COVID-19-related order delays to our full-year projections have been more than offset by a stronger-than-expected Q1 2020, better-than-expected international

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This article was written by

Steve Auger profile picture

I have been trading stocks, commodities, and options for more than 25 years. I have honed my skills in quantitative analysis and various stock investment tools for 15 years at Portfolio123 and offer services as a consultant in stock portfolios. I also own the financial data service Equity Analytx which provides aggregated fundamentals for a wide range of industries.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (19)

who are competitors ? why comparison to saas
Steve Auger profile picture
DGLY is main competitor.

"why comparison to saas"

Because it is SaaS.
Good1 profile picture
Almost hit $105. Go baby go.
zito profile picture
Great products, but I would like to see weapons spun off.
After the jump to near $100 it's trading at 10X sales; pricey. State and local funding (especially for police) is a big risk. I'm to wait until something goes wrong and gets the price back to the $70's.
Steve Auger profile picture
"State and local funding (especially for police) is a big risk."

After the george Floyd incident, funding for body cams is no longer an issue. And international sales from countries that Axon has never dealt with before are popping up.
Chicken of the Cave profile picture

Axon has barely penetrated the international market.

Their cloud-based subscription service for body cam is a sustainable model that embeds itself into departments long term. Their weapons are in perfect spot to hit a surge in growth and capitalize on the push to eventually utilize non-lethal incapacitation exclusively.
Own both AAXN and WRTC. Great products, excellent environment (unfortunately) for expanding their customer base and best of all they sell product to governments:.the most liquid customer you can have. Risk I see with WRTC is that it turns out to be a one trick pony.
You said the biggest risk was muni gov’t. What about competition from WRTC...? That is a DIRECT competitor to Taser.

Makes you wonder if $AAXN comes knocking with a buyout offer on $WRTC...

Quarter-end 3/30/20: Taser product line revenue was ~$75M, which was ~51% of AAXN’s total revenue for the quarter.

If Bolawrap takes off and starts taking market share, Taser either has to create a competing product and ditch Taser or buy WRTC......

Steve Auger profile picture
It is unlikely that WRTC will take market share as wrap has limited application. Thanks for commenting.
Steve Auger profile picture
It is unlikely that WRTC will take market share as wrap has limited application. Thanks for commenting.
The CEO of WRTC is the brother of Axon’s CEO. I think it’s more likely they do business together than compete. Taser is meant to stop a threat. The wrap is more like a lasso used to detain someone. If anything the wrap would be a great tool to be used after the Taser is deployed or a non-violent person.

As far as a buyout goes, Rick has made it clear that he has no interest in owning hardware companies. The future of Axon and the money is In software. I could possibly see WRTC paying Axon a fee to incorporate their products into their bundles.
MANHATTAN RICH profile picture
Thanks for the article.
Jules James profile picture
I'm a dividend guy. AAXN and SQ are the only non-Div stocks in my portfolio. Just sold covered calls on SQ. AAXN is a keeper through thick and thin. Old School conservative no-debt, nuts-n-bolts products augmented by computers. Wholesale, no retail. Sure wished it paid a Div...
Chicken of the Cave profile picture
Love it. Absolutely love it
Chris Valley profile picture
I love it when my SA article headline has a pun- it's so electrifying!

And I will be selling a bowling alley short strangle in axon-all the strikes. But that doesn't mean it's a turkey.
Steve Auger profile picture
"bowling alley short strangle in axon-all the strikes"

I'm not sure what that means :-)
Chris Valley profile picture
I sell options. Sometimes I don't like to add size to my position. Sometimes it's easier to just add another position, or more lucrative to frame it differently...Eventually...it just looks like a bowling alley with bumpers and lots of strikes! Then, I put my hand over the blower thingy, rosin bag, and roll a split spare in a new frame!

:-) Can't gutterball me in both gutters!
he has options legs for up,down and perhaps even sideways. it's not as complicated as it seems and capturing profit in each leg is easiest if vega(volatility) picks up once in position.
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