Should You Buy, Hold or Sell Axon Stock Post Q4 Earnings Release?

Axon Enterprise, Inc. AXON reported better-than-expected fourth-quarter 2024 results on Tuesday. Earnings per share surpassed the Zacks Consensus Estimate by 36% and surged 84.1% year over year.Total revenues of $575.1 million surpassed the consensus estimate of $566.1 million and increased 34% year over year. The fourth-quarter results benefited from solid momentum in its TASER and Software & Sensors segments.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.AXON has been reporting strong earnings results courtesy of solid financial and operational performance from both of its segments. The public safety technology solution provider surpassed expectations in each of the trailing four quarters, with an average earnings surprise of 21.6%.Image Source: Zacks Investment ResearchFactors Contributing to Axon Stock’s PerformanceAxon’s TASER segment is thriving on the back of strong demand for TASER devices and growing adoption of its virtual reality training solutions. Segmental revenues jumped 37.1% year over year to $221.2 million in the fourth quarter. The company continues to witness growing popularity for its next-generation TASER 10 devices, whose shipment began in first-quarter 2023. Also, growth in cartridge revenues, driven by higher adoption of the TASER products, has been driving the segment’s performance. In 2024, AXON shipped more than 200,000 TASER devices, 300,000 body cameras and 9 million cartridges.The addition of new users and associated devices to the Axon network is aiding the Software & Sensors segment. Increased adoption of Axon Evidence and premium software offerings are driving Cloud and Services’ growth within the segment. Cloud and Services revenues climbed 40.6% to $230.3 million in the fourth quarter. Axon introduced its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera is generating significant demand, thus bolstering the segment’s growth. Shipment of this body camera began in June 2023 and the customer response has been impressive so far. Within the Software & Sensors segment, Sensors & Other revenues rose 17.5% to $123.6 million, supported by increased demand for Axon Body cameras.The company’s investments in newer areas within the software business, like AI products, real-time operations, drones and robotics, bode well for growth. This, along with the strength in the TASER 10 device, led it to provide a bullish guidance. For 2025, Axon expects revenues to be in the band of $2.55-$2.65 billion, indicating growth of approximately 25% year over year. Adjusted EBITDA is expected to be in the range of $640-$670 million, implying an adjusted EBITDA margin of about 25%.AXON remains focused on strategic collaborations with other companies to expand its product offerings and customer base. In June 2024, Axon entered into a partnership with Skydio (a leading U.S. drone manufacturer) to introduce a comprehensive line of drones in public safety that includes a scalable Drone as First Responder (DFR) solution. The offering incorporates autonomous drones, onsite docking stations and integrated flight control solutions from Skydio and real-time operations, real-time crime center capabilities and evidence management solutions from Axon.The combined offering supports Axon’s DFR programs across its customer base and strengthens its market position in this category. Also, the company’s acquisition of Dedrone (in October 2024), a global leader in airspace security, boosted its DFR offerings.Axon’s Northward Earnings EstimatesWhile the Zacks Consensus Estimate for AXON’s 2025 earnings per share has increased 2% to $6.63 in the past 60 days, the same for 2026 has increased 6.4% to $8.34.Image Source: Zacks Investment ResearchNear-Term Concerns Prevail for AxonThe escalating costs and expenses are a concern for Axon’s bottom line. In 2024, the company’s cost of sales soared 39% year over year. The metric, as a percentage of sales, was 40.4%, up 160 basis points on high costs and expenses related to business integration activities, higher wages and stock-based compensation expenses. The increase in operating expenses has been adversely impacting the company’s margins of late. In 2024, Axon’s gross margin declined 160 basis points year over year.AXON Shares Underperform Industry, S&P 500 & PeersShares of the company have lost 18.7% in the past three months compared with the Zacks Aerospace - Defense Equipment industry and S&P 500 composite’s decline of 6% and 1%, respectively. It has also underperformed compared with other industry players like Woodward, Inc. WWD and Teledyne Technologies Incorporated TDY, which have returned 2.3% and 3.2%, respectively, over the said time frame.AXON Stock’s 3-Month Price PerformanceImage Source: Zacks Investment ResearchStretched AXON Stock Valuation Remains an OverhangAXON’s lofty valuation remains another concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 78.12X, significantly higher than the industry average of 36.27X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. Also, the stock is overvalued compared with its peer, Leonardo DRS, Inc. DRS, which is trading at 27.43X.Our Final TakePersistent strength across the TASER and Software & Sensors segments, along with its investments in AI products, drones and robotics, positions AXON favorably for impressive growth in the long-run. However, near-term challenges, such as escalating operating expenses, premium valuation and lower return compared with the industry, are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Teledyne Technologies Incorporated (TDY): Free Stock Analysis Report Woodward, Inc. (WWD): Free Stock Analysis Report Axon Enterprise, Inc (AXON): Free Stock Analysis Report Leonardo DRS, Inc. (DRS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks