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Axon Enterprise (AXON) Gains From Business Strength Amid Risks

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Axon Enterprise, Inc. (AXON - Free Report) has been benefiting from strength in its TASER segment, supported by growing popularity for this segment’s devices and cartridge products. Stable demand for virtual reality training services has also been supporting the segment’s growth. Also, solid momentum in Axon Evidence and cloud services, driven by an increase in the aggregate number of users, average revenue per user and software add-ons, is driving the Software & Sensors segment’s growth.

Axon Enterprise 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 expected to generate significant demand, thus bolstering the segment’s growth. The company has been witnessing strong customer response since the shipment of this body camera began in June 2023.

With the strong initial response for Axon Body 4 camera and TASER 10 device, management provided a bullish guidance for 2024. The company expects revenues in the range of $1.88-$1.94 billion, indicating growth of approximately 20-24% from a year ago. It expects adjusted EBITDA of $410-$430 million in 2024 with a margin expansion from 2023.

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In the past three months, this Zacks Rank #3 (Hold) company has gained 30.1% compared with the industry’s 13.6% growth.

However, tepid demand for Axon Enterprise’s legacy TASER 7-series has been partly affecting the performance of the company. In fourth-quarter 2023, sales from TASER 7 remained flat quarter over quarter.

Escalating operating expenses poses a threat to AXON’s bottom line. In 2023, the company’s cost of sales soared 31.8% year over year. Despite the recent signs of easing, lingering supply-chain disruptions might impede the company’s growth. Also, the company incurred research and development expenses of $303.7 million in the same year, representing an increase of 29.9% year over year.

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