3 Reasons to Buy Axon Stock Like There's No Tomorrow

Are you looking for growth stocks besides the market's obvious and most-owned names? That's a tall order these days. The mega-companies are keeping up-and-coming competitors at bay, even as their own stocks seem fully valued.

If you dig deep enough, however, you'll find such stocks. Take Axon Enterprise (NASDAQ: AXON) as an example. This mostly unknown company has few competitors, and even fewer direct competitors. Yet it's in a market that's not only already been growing well, but could be on the verge of outright exploding.

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Here's what you need to know.

What's Axon Enterprise?

You may be more familiar with the company than you realize.

Ever heard of a Taser gun? It's not just a type of non-lethal conducted-energy device. It's actually a brand name for these alternative weapons -- a brand owned by Axon. The company also makes body cameras worn by law enforcement and security personnel, stationary security cameras, security and recording software, and now, even security drones. Axon offers all the necessary training needed to make the most of these technological tools as well.

It's not a huge organization, to be sure -- at least not yet. It's currently doing roughly $2 billion worth of business per year, and thanks to the stock's huge 2024 rally its market cap stands at just under $50 billion. That's relatively expensive compared to revenue. The company's consistently profitable, though, and increasingly so.

AXON Revenue (Quarterly) data by YCharts

Axon's projected top-line growth of nearly 33% is expected to drive per-share profits up from 2023's $4.14 to $5.24 this time around, en route to $6.29 per share in the year ahead.

Sure, this stock might be expensive, but the market supports these sorts of steep valuations when this pace of earnings growth is seemingly unstoppable.

The chief reasons to plow into Axon stock sooner than later, however, are considerably more specific.

Three reasons to buy Axon stock

These aren't necessarily the only reasons you might want to step into a stake in Axon while the stock's down a bit from its early December peak. But these are the big ones, checking off all the boxes that turn a good investment prospect into a great one.

1. A growing market that could accelerate

It's not exactly a scintillating market, but the security technology industry is a growing one. Mordor Intelligence expects the body cam market alone to grow at an annualized pace of 16% through 2030, extending a rate that's been in place for several years now; Business Research Insights puts the figure closer to 34% per year, when it should be worth more than $24 billion.

Whichever of the two figures is on target, neither is difficult to believe in light of the sociocultural environment. Interactions with law enforcement professionals are becoming more commonplace, as well as more confrontational. Body cams are increasingly popular just because they ultimately protect the innocent, and provide evidence should a law enforcement interaction lead to litigation.

2. Axon is a one-stop, all-encompassing solution

Axon doesn't simply help police officers record their activities. It also provides entire platforms with court evidence uses in mind. For example, its software called Axon Evidence helps with investigation and document-preparation tasks like redaction and conversation transcription, and more. Axon Justice, meanwhile, is specifically aimed at prosecutors and public defenders, helping assemble video timelines when multiple cameras have captured the same event from different perspectives. Its records management tools simplify report writing, too.

It's got Tasers, but it doesn't just sell them. Axon also provides virtual reality-based training for its non-lethal weapons. It even sells sensors that can be attached to gun holsters to automatically turn a body-worn camera on in anticipation of a potential interaction between a suspect and a law enforcement official. It then saves and sends that video to a centralized digital-storage platform.

All of these solutions are available from other providers in a stand-alone package. Axon's solutions are a complete -- and custom-built -- turnkey offering, though, making them easy for agencies and police departments to buy and use.

3. Drones (land and air) are a bolt-on opportunity

Finally, although drones aren't exactly new, drone technology has come a long way in a short period of time, making them far more useful tools to emergency personnel than they were just a few years ago.

Take the Axon Air aerial drone as an example. This camera-carrying drone can be flown remotely, without the pilot needing to maintain the line of sight that was once necessary for radio-controlled aircraft. This tech allows emergency responders to gain real-time information in places that may be inaccessible or unsafe to enter by foot.

Axon's Sky Hero adds a dimension to this functionality. This aerial drone can be delivered and deployed by a remote-controlled ground-based drone when it's not clear to first responders when and where a flying drone may need to be deployed.

The prospect of these new tools is compelling to investors, but not just because of their value to law enforcement and emergency personnel. These are exciting growth engines because they won't necessarily cannibalize Axon's existing body-cam and video management software business; this will be entirely additional revenue.

In this vein, market research outfit Lucintel expects the police drone market alone is set to grow at an annualized rate of more than 11% through 2030. Axon's drones, however, aren't necessarily just for police departments or other law enforcement agencies.

Not for everyone, but for more than currently own it

It's a bullish story to be sure. But this stock may not necessarily be a great pick for every single investor. See, Axon is still a high-growth stock, and as such is capable of the same volatility that similar, more-familiar growth stocks dish out. Its steep valuation aggravates this volatility, of course.

If you can stomach this volatility, Axon offers outstanding near-term and long-term upside potential.

The kicker: This company has been able to drive sales and earnings growth regardless of the economy's condition at any given time. This countercyclical defensiveness alone makes Axon Enterprise a compelling pick for more investors than currently own it, or are considering buying it.

Should you invest $1,000 in Axon Enterprise right now?

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise. The Motley Fool has a disclosure policy.