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This Stock Offers Immense Growth -- With No Real Competition

By Motley Fool Staff and Emily Flippen – Dec 9, 2021 at 2:00AM

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Axon has major competitive advantages in the software space.

American software and technology company Axon Enterprise (AXON -2.81%) is playing the long game with strong retention rates as well as expansive growth opportunities.

In this "Industry Focus" video, recorded on Dec. 1, contributor Brian Stoffel and Motley Fool Analyst Emily Flippen discuss Axon's competitive advantages within the software space. 


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Brian Stoffel: Much of those software solutions are relatively underpenetrated as well., that is used by the vast majority of police departments. But if you look at the company's software webpage site, they have so many different solutions.

Axon Records, for instance, that is a relatively new product. I know the Baltimore PD was one of the first to pick it up, and it needs to prove itself. It could be a huge driver in the future.

But the other thing I want to add is that Axon really does play the long game. Here's what I mean, they bundle a whole bunch of their packages together. One thing that they will do is when Axon Records was coming out, Emily, they'd say, "Hey, get our taser bundle, get the Axon bundle, and it comes with and your first year of Axon Records, totally free."

They do that with all these new products that they roll out, and some people use them and some people choose not to. But the fact of the matter is that while it is getting a huge moat around it because of switching costs, that's not showing up on the income statement right away. It's important to know that.

Emily Flippen: A good forward-looking indicator for how those sales could pan out would be their net retention rate which is almost 120% in the quarter. That may not sound impressive to investors who are custom to hearing some insane numbers from really upcoming software companies.

But to be clear, the market that Axon is competing in are government budgets, state-run or local budgets. These are not police forces that are run by private organizations, for the most part, so they don't have unlimited budget for these solutions.

The fact that they're managing to expand is nearly 20% on top of retaining that growth that they had in the prior year is actually really compelling. To your point, Brian, when you look at dispatch and records management, both of which are initiatives that management sees panning out over the next three to five years, so a lot of growth still ahead of them.

When you look at the biggest competitors in this space, there are no real software options. They're competing against literal paper and pen.

Brian Stoffel owns shares of Axon Enterprise. Emily Flippen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool has a disclosure policy.

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