The law enforcement company Axon Enterprise (AXON 2.40%) appears to be making the biggest strategic shift in its history. Management made a big announcement that its hardware and software products are coming to the consumer market, which just happens to increase the company's total addressable market (TAM) from $27 billion a year ago to $52 billion.
Axon has become a go-to provider for its Taser stun guns, body cameras, and cloud services for law enforcement, but its consumer business is minuscule. Management thinks it can change that, and if it can, its growth story could continue for a long time.
An Axon body camera. Image source: Axon.
Axon's consumer shift
Axon breaks down its TAM into a number of areas like market, region, and product. Usually, its TAM is focused on existing markets like law enforcement in the U.S., and there are periodic additions. New products like fleet cameras, virtual reality technology, and drones are rolled out.
What's not from the company's earnings report after the third quarter of 2021 is that its TAM nearly doubled in one swoop. The biggest reason is that it now thinks there's more opportunity in the consumer market than in law enforcement. Here are key numbers from the company's earnings release.
| Segment | 2020 TAM | 2021 TAM |
|---|---|---|
| Law Enforcement | $15.0 billion | $16.2 billion |
| Consumer | $1.8 billion | $17.8 billion |
This is a big shift not only in its TAM, but also in how management sees its place in society. This might no longer be a law enforcement company; it could be a personal-safety company. That's the theory anyway.
What's Axon going to be selling?
Management didn't lay out exactly what the company will be selling to consumers, but Tasers have long been available to the public, even though few people know that. The company did say that it would combine the law enforcement and consumer platforms, implying that products would look similar. That makes sense from both an efficiency and safety standpoint.
What else Axon will add for consumers isn't yet known. Management was guarded in its response to questions from investors, but I think the biggest tell is that it wants to offer similar products to law enforcement and consumers.
Tasers are a clear place where Axon will offer more consumer products. And that's still its biggest product segment today, so this could be a huge consumer market. But cameras and cloud services are growing quickly as well. Will we see fleet cameras and body or home cameras with cloud backup? Eventually, these products probably make sense in the pipeline.
Axon's moonshot
In a presentation to investors, CEO Rick Smith said his moonshot for the company is to "obsolete the bullet." That means replacing guns for law enforcement and for consumers.
That is a big goal, but it makes sense given Axon's mission as a company. If it gets its way, Tasers and even Axon cameras may be used for personal security and protection. It's a big goal, but could make this a growth stock for many years.
