Axon Stock Pitch

Intro - Axon

Axon Enterprises, based out of Scottsdale, AZ, is a key player in the self defence and body-camera industries. Their primary target market is police forces and military forces both in the US and internationally. Founded in 1991 as TASER industries, Axon got their start as the first mainstream manufacturer of the TASER product commonly used by police officers and soldiers as a nonlethal weapon. From there, Axon has expanded into the body camera market and data management market. Aimed at police forces, Axon sells their body cameras as a bundled package for one initial purchase price and then a recurring monthly payment. Included in that bundle is the camera and access to a full developed software that enables police forces to watch live, collect historical footage, and manage all footage in a cloud-based storage solution. Since releasing that bundled package, Axon has further developed their cloud storage services to allow any law enforcement to purchase their cloud storage as an easy way to sort and protect any case data. Key to Axon’s growth, all of their products seamlessly work together and therefore encourage law enforcement to convert all hardware and software to Axon products. Axon has offices in Arizona, Seattle, Australia, and Europe.

Competitive Environment/Advantages

Axon has two key competitive advantages. First, their the licensed owners and producers of the TASER product - a well known and well respected brand name in the nonlethal self defence industry. This makes Axon the go-to brand for government agencies that are more performance and reputation oriented rather than cost oriented. Axon’s second key competitive advantage is the intuitive cross functionality of their products. The web-based systems that monitor their body cameras can also connect to their auto-sensing holsters that can tell agencies the exact second that a weapon is removed from a holster. All of that data can then be added to any case evidence and then stored in their separate case-storage software with ease. This is type of cross-functionality has proven to be extremely successful for companies such as Apple, the only difference is that Axon is the only firm in their market offering this type of product.

Financials

52 week range, what caused main fluctuations/where is the current price in relation

In the last year, AAXN has faced significant fluctuation in terms of share price with a range of 23-76. They achieved their 52 week high in September and began to pull back towards current levels because of a brief pullback in the general market, as far as we could determine, the fall in the share price is more because of trends faced by the general market rather than a change in company fundamentals.

EPS (earnings per share. How often the company hits earnings)

AAXN currently has earnings per share of 59 cents. Based on their previous data, they have demonstrated a strong ability to hit their earnings targets and are growing their earnings as a firm. We believe this trend will continue going forwards.

P/E ratio (how does it compare to the industry)

Their current P/E ratio is 76 which is relatively high. Unfortunately, they are a unique company in that they are very involved with software in addition to the hardware of their products so some might consider them to be a tech company (if this were the case, the ratio is far below many other firms in the industry) but because of what their products are designed for, they are viewed as a defence stock. In relation to the defence industry, their ratio is higher than many other companies in the space. We do not believe that this high ratio is of concern because we believe them to be a growth company which will eventually begin to increase earnings at an increased rate.

Beta (use company beta in context and explain its current level

Axon has a beta of exactly 1 (the volatility of the market). This fits well with the pullback they experienced in September in line with the market. Despite having a volatility level similar to that of the general market, we believe them to be positioned strongly and relatively immune to a recession like event which may draw the overall market down. Because of the nature of their products and the recurring payments they have built into their sales approach, we believe there exists a strong demand for their products regardless of the state of the overall market.

Dividend

Axon Enterprises does not pay its shareholders a dividend.

Why Buy?

Given Axon’s strong reputation in the defence industry and their high stock performance, Delcan and I see Axon as a safe and sensible addition to our portfolio. Not many companies have invested so much into R&D and maintained zero debt in doing so. Furthermore, Axon faces no real competitors in terms of market reach and the products/services they offer. Finally, this stock works to further diversify our portfolio.