What: Shares of TASER International, Inc. (NASDAQ:AAXN) jumped as much as 14% on Wednesday after the LAPD moved a step closer to choosing the company for a big contract.
So what: On Tuesday, the L.A. Police Commission said it approved a five-year $31 million contract with TASER International for 6,140 Axon body cameras and 4,400 Tasers that could be the widest adoption by a U.S. city. The contract needs to be approved by the city, but it's a big win nonetheless.
The LAPD has been testing 860 units bought with private funds, but this would bring body cameras to a much wider group of officers.
Now what: For TASER International, a $31 million contract may not change your investment thesis, but winning a big contract with the LAPD would be big and may signal wider adoption for law enforcement across the country. Wins like this also help reinforce the additional spending the company has been putting into developing next-generation Axon products, including the cloud-based services it is now offering.
Long-term, the trends in law enforcement favor products like body cameras and Tasers, and TASER International is well positioned to take advantage. What investors will want to watch in coming quarters is the amount of service revenue the Axon line can generate on an ongoing basis, and if this contract is any indication, the numbers should get stronger over time.
Travis Hoium owns shares of Taser International. The Motley Fool recommends Taser International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.