Investors, take note: Axon Enterprises (AXON 0.65%) nearly doubled their market opportunity recently.
In this "Industry Focus" video, recorded on Dec. 1st, Emily Flippen and Brian Stoffel examine the implications of this expansion.
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Emily Flippen: I'm really happy that management finally got around to updating this number -- how they define their total addressable markets. I have pitched Axon for services that I've worked on with The Motley Fool in the past, and the question that I get from those who work on services with me is: "Well, how big is this market?"
And if you try to make the numbers work for Axon, you'd quickly find out that you were making the implicit assumption that the market for Axon's opportunities was much bigger than the opportunity that management had laid out. That's a hard argument to make. You're saying, "I understand the market opportunity more than management does."
A lot of people I think were understandably skeptical, saying, "If this business is really going to beat the market over the next 5-10 years, the market opportunity has to be bigger than the 27 billion that they laid out."
And in the most recent quarter, management finally [laughs] nearly doubled that market opportunity to $52 billion. Largely thanks to expansion into new geographies, new types of customers, EMS solutions, as well as those new products.
Brian Stoffel: Emily, I want to get to where that growth is coming from in a second. But, I just want to underline again that this is why I understand why people need to look at the total addressable market. It is also why I pay absolutely zero attention to the total addressable market.
Most people think it's because I think that management would overstate a total addressable market, but that's not it. It's because, when we think about a total addressable market, we are implicitly making a prediction about the future. We are saying that the world tomorrow is going to be the same as the world today.
Go back to December 31st, 2020, and read about total addressable markets for cloud companies, and you will see that all those predictions were off by an order of magnitude. Why? Because COVID hit. You might say, "Well, but we couldn't have known COVID would hit." Guess what? We don't know what's going to hit over the next five years either -- so I pay zero attention to it.
To me, I ask myself: Was protecting life important in the past? Yes. Is it important today? Yes. Will it be important tomorrow? Yes. Does this company have a history of finding new ways to protect life? Yes. Game over. But, I do think where those numbers come from are interesting.
