What happened
Shares of Taser and body-camera company Axon Enterprise Inc. (AXON -2.41%) have jumped 153.8% so far in 2018, according to data provided by S&P Global Market Intelligence, as investors cheered the company's continued growth and margin expansion. Shares are bouncing near their 52-week high, so there doesn't appear to be any slowdown in momentum.
So what
Operationally, Axon continues to grow, with first-quarter revenue up 28% to $101 million. Along with results, management increased growth guidance from a range of 16% to 18% to a range of 18% to 20% for all of 2018. The growth is great, but what investors really like in 2018 is margin expansion. Management continues to expect operating margins to increase 300 to 400 basis points over 2017, which should leave the company solidly profitable for the year.
Image source: Axon Enterprise.
New products also continue to hit the market, which will drive long-term growth. The Axon Fleet 2 in-car video system was released earlier this year and already had 2,601 orders by April. A partnership with DJI to bring drones to law enforcement was also announced, expanding where the company's video can come from.
What could take Axon's growth to the next level is a records management system due to launch later this year, which could make the company the center of law enforcement's efforts to collect data.
Now what
Axon Enterprise's growth story has just begun. And with body cameras and cloud storage of evidence growing, I think the company could grow for the next decade.
But investors have to pay up for the quality, with shares trading at over 100 times expected 2018 earnings. Given the potential for Axon to transform law enforcement, I think this is a quality stock worth owning, but it could be volatile given the run shares have gone on already this year. So don't expect the gains of the last few months to continue.
