Why Axon Enterprise Stock Is Charging Higher Today

Law enforcement vendor Axon Enterprise (NASDAQ: AXON) posted strong year-over-year growth in the first quarter and raised its guidance for the year. Investors cheered the results, sending Axon shares up 12% as of 10:30 a.m. ET.

Image source: Axon Enterprise.

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Continued strong growth

Axon, the maker of tasers, body cameras, evidence tracking software, and other products for law enforcement customers, earned $1.41 per share in the first quarter on sales of $604 million, easily topping Wall Street's estimate of $1.24 per share on sales of $586 million. Sales were up 31% compared to a year ago and per-share earnings climbed by 23%, marking the 13th consecutive quarter of at least 25% revenue growth.

Software led the way, with 39% revenue growth, which sets Axon up nicely for future growth. Annual recurring revenue grew by 34% to $1.1 billion and the company improved its net revenue retention rate by 1 basis point to 123%, suggesting that existing customers continue to do more business with Axon.

Axon said it now expects full-year revenue of between $2.6 billion and $2.7 billion, which is about $50 million above previous estimates. At the midpoint of that range, the guidance would suggest full-year growth of 27%.

Is Axon Enterprise a buy?

Axon has been an amazing performer through the years. The only knock on the stock is that a lot of that future growth is arguably already priced in. Axon shares trade at more than 100 times future earnings.

This is a stock that seemingly always looks expensive, but with a track record of justifying investor optimism. The key to Axon's success has been to forge tight relationships with its customers and continue to layer on new products to increase spending.

To that end, the company recently updated its vehicle intelligence platform to incorporate capabilities like automated license plate recognition and real-time camera alerts.

Investors need to be aware that stocks like Axon with a high valuation tend to be volatile, and even a slightly less-than-perfect quarter can send shares tumbling. But for those who can stomach that risk, Axon shows no signs of slowing down.

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Lou Whiteman has positions in Axon Enterprise. The Motley Fool has positions in and recommends Axon Enterprise. The Motley Fool has a disclosure policy.