Stun Gun Maker's Profit Grew 152%; AI Enhances Its Products

IBD Sector Leaders component Axon Enterprise (AXON) reported an outstanding second quarter report on Tuesday. The stun gun and body-camera maker also raised its full-year revenue guidance, which sent the stock soaring.

Axon Enterprise makes Taser brand stun guns, body and in-car cameras and drones. The company also makes software used in transcribing, redaction, video playback and dispatching, and sells it as a subscription service.

Their products are used by law enforcement, federal, corrections, fire and first responder, security, retail and health care industries.

Axon uses artificial intelligence in transcription, video redaction and automated license plate recognition. The company has been working on a six-year plan to use AI to pull data from body-camera videos to assist officers in writing police reports.

The Taser stock got a 14.1% jolt on Wednesday in heavy volume, following Axon's better-than-expected second-quarter earnings and sales numbers late Tuesday.

Shares are in a long consolidation with a 229.95 buy point, according to MarketSmith pattern recognition. But aggressive investors could have bought shares as they broke above a trendline around 206 this week.

The stock retook its 50-day moving average for the first time since May 9, when it plunged 15.1%, following the company's Q1 earnings report with its declining gross margins.

The relative strength line has weakened but reversed course and spiked on Wednesday's price jump.

Axon easily topped second-quarter earnings and sales estimates. The stun gun maker's quarterly profit grew a whopping 152%, up from 96% and 52% in the prior two quarters, and a decline of 49% three quarters ago.

Quarterly revenue grew a healthy 31%, but slowed from 34% and 54% in the last two quarters. Its Axon Cloud & Services revenue grew 62% over last year. Growth came from adding new customers and augmenting services to existing customers.

Management raised its full-year 2023 revenue guidance to $1.51 billion to $1.53 billion, from its previous forecast of $1.44 billion to $1.46 billion. The increase is due to two new successful Taser and body-camera products.

Analysts expect healthy 43% full-year earnings growth this year and 18% in 2024.

Axon ranks No. 1 out of 46 stocks in the security/safety industry group. The group moved up to No. 50 out of the 197 IBD industry groups from 76 four weeks ago.

Mutual funds own 56% of shares, with 1,260 owning the Taser stock in June, up from 964 in March and 713 in December.

Axon holds best-possible 99 IBD Composite and EPS Ratings.

Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.

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