Among last year's top gainers was Axon Enterprise (AXON +0.87%), which makes tech-based software and hardware for the law enforcement and public safety industries.
Axon has been a winning stock for a long time, but 2024 was a breakout year with the stock's 130% gain making it one of the best performers in the S&P 500.
Axon is launching new products and services, developing an artificial intelligence (AI) platform, and benefiting from tailwinds in its industry. Can it double again this year?
Tailwinds and high expectations
The company is best-known for the Taser guns it sells to law enforcement agencies, but it offers a full platform of products and services to improve public safety outcomes. This includes body cameras, drone solutions, cloud storage, and more.
Axon leveraged its first-mover edge with the Taser to build a dominant industry position. Its platform is self-sustaining -- users stay in the ecosystem because they need things like cartridges for their Tasers and cloud storage for their body cam footage. This also offers the company a robust recurring revenue stream. As it rolls out new products, it has also gained new clients, such as a recent contract with the Royal Canadian Mounted Police, and it has its largest-ever pipeline of new contracts coming up.
NASDAQ: AXON
Key Data Points
Revenue continues to increase at healthy rates with more than 30% growth through the first three quarters of 2024, and the company has delivered 11 straight quarters of at least 25% growth. Axon is also profitable. Wall Street expects earnings per share (EPS) in the fourth quarter to reach $1.40, up 25% from the year-ago period. And it has a long track record of beating analysts' estimates by a wide margin.
Axon is harnessing the power of AI to offer a whole slew of services that can change the law enforcement industry. For example, AI can help users analyze data and produce instant reports, improving the speed with which they can use information and take action. Other services include auto-transcription and license plate reading.
An expensive proposition
The company's growth and business pipeline support the argument that Axon is in its prime right now. The flip side is the the market has become increasingly aware of what Axon has to offer, and the stock has skyrocketed.
After hitting multiple all-time highs last year, the stock retreated in December, but it still trades at seriously high valuations multiples. Below, you can see how it compares to the S&P 500.
Data by YCharts.
The recent momentum indicates Axon should continue to grow its business at healthy rates in 2025. Looking down the road five or 10 years, Axon stock could be trading at a much higher valuation than it does today.
So if you have a long time horizon, Axon could add value to your portfolio, but given the premium price it already commands, investors shouldn't expect the stock to double again this year.
