Raymond James: Axon Still Underappreciated After 170% Pop

Axon Enterprise Inc (NASDAQ: AAXN) has surged 169 percent since the beginning of the year — and the Taser manufacturer has more runway ahead, according to Raymond James. 

The Rating

Analyst Brian Gesuale initiated coverage of Axon with an Outperform rating and $79 price target.

The Thesis

As it is, Gesuale considers Axon something of a game-changer. (See the analyst’s track record here.) 

“The company has covered a lot of ground since it launched its successful but episodic Taser hardware business three decades ago and is more recently on a path to build a recurring subscription business that will transform the supply chain of information from the cop to courtroom and redefine engagements between law enforcement and citizens,” the analyst said, crediting Axon with improving police productivity and reducing lethal force.

By his estimation, the firm’s transition from hardware and software sales to recurring-revenue software subscriptions; its insulation from economic and political volatility; and its exit from a low-profit period of high research and development investment merit a constructive outlook.

“The investments (EBIT losses) peaked in 2017 and should improve every year until the crossover to profitability that we are modeling in 2020, with mature margins in that segment by 2022,” Gesuale said. 

An upcoming cloud-based records platform for law enforcement could double Axon’s total addressable market in the next few years, according to Raymond James. 

Price Action

Axon shares were up nearly 2 percent at $72.84 at the time of publication Friday. 

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U.S. Army photo via Wikimedia.