Analysts might need to rethink their outlook for Axon Enterprise (NASDAQ:AXON) after the maker of stun guns and body cameras blew away third-quarter earnings estimates.

But the real story is that Axon sees its total addressable market opportunity nearly doubling to $52 billion this year on the strength of its new focus on the consumer-products market. Management believes this opportunity can surpass the existing law enforcement segment.

Wall Street forecasts approximately 20% upside for the stock over the next year, but that could rapidly change as Axon begins pouring more resources into devices designed for personal protection and other markets where it currently has little to no presence.

Police officer talking with civilian

Image source: Axon Enterprise.

Bringing personal protection home

Consumer demand for personal protection in the wake of last year's civil unrest and rising crime rates fueled record firearm sales, and they remain at elevated levels even today.

Axon believes the consumer market for less-than-lethal protective devices will surge from $1.9 billion last year to $17.8 billion this year, exceeding $16.2 billion law enforcement market. 

Despite Axon's expertise in developing stun guns, it has a negligible presence in the consumer market. It's looking to dramatically alter its potential as a growth stock over the next 18 to 24 months by introducing a host of consumer products that leverage its technical capabilities in law enforcement.

To do so, it will condense its separate platforms into one that relies upon the technological enhancements it has made for Tasers (its law enforcement stun guns) while also introducing personal safety solutions to mobile phones.

Setting off in new directions

It also plans to expand into other new markets, such as the judiciary, where it will introduce the evidence database-management software it now uses with law enforcement agencies. Management said in the third-quarter press release, "Not only is our goal to save attorneys time, but also to shorten the time people are jailed awaiting trial."

That is forecast to be a much smaller market (only about $1.0 billion), but it shows how Axon is looking to scale up its business. Other potential markets it wants to penetrate further include federal agencies (an $8.9 billion market) and enterprise customers ($6.4 billion).

In total, management believes it only has 2% penetration into its various addressable markets, which suggests there is a long runway for the company's growth.

A lucrative growth opportunity

Even in what might be considered the more mature law enforcement market, Axon Enterprise is still seeing impressive momentum.

Revenue jumped 39% in the third quarter to $232 million, which was on top of the 27% gain it recorded in the same quarter last year. While the U.S. is the biggest market for Axon, international growth of 70% more than doubled its growth at home.

Adjusted earnings per share of $1.17 far outpaced the consensus estimate of just $0.27 and is well ahead of the $0.40 result Axon registered a year ago.

With no debt on its balance sheet, over a half-billion dollars in cash and equivalents, and major new markets to lean into, don't be surprised if Axon Enterprise continues to surprise the market in the quarters to come.

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