Investing

Prediction: Axon Enterprise (AXON) Is Potentially the Next Stock-Split Stock

Rich Duprey

Published: November 3, 2024 9:34 am

Last Updated: November 8, 2024 8:41 am

It has been 20 years since Axon Enterprise (NASDAQ:AXON) completed a stock split, but its next one could come as soon as next week. The stun gun maker is scheduled to report earnings on Nov. 7 and with AXON stock trading near its all-time record high, it is a prime candidate for splitting its shares.

Companies can split their shares for any reason, but increasing liquidity and making their shares accessible to smaller investors is often a top reason given by management. As Axon is trading well above $400 a share today, now is an opportune time for it to give retail investors a greater incentive to buy in.

24/7 Wall St. Insights:

• It’s been 20 years since Axon Enterprise (AXON) last split it stock, and that year it actually split the shares three different times.
• Sales are soaring, profits are widening, and the introduction of generative AI is causing a groundswell of demand, priming AXON stock to split again.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

A rising tide for accountability and safety

Axon Enterprise is more than just a stun gun maker, of course, and all of its products and services are interconnected via the cloud. 

Data from when a Taser is deployed or a body or in-car camera is activated is integrated into its Evidence.com database management system. It allows law enforcement to zero in on selected incidents and store, sort, and seamlessly retrieve information.

Demand from the public and police for accountability and safety has caused sales to soar. Net sales in fiscal 2023 jumped 31% from the year ago period, and over the first six months of 2024 sales are up 34%.

Management raised its guidance after the second quarter, boosting revenue forecasts to between $2 billion and $2.05 billion, which implies a 29% increase at the midpoint from last year. It also expected adjusted EBITDA of $460 million to $475 million, which implies and adjusted EBITDA margin of 22.3% at the midpoint, ahead of last year’s 21.1% margin.

With AXON stock up 64% so far in 2024, further share price appreciation is likely.

A unique stock split history

While that doesn’t mean Axon will announce a stock split, it makes a compelling case for doing so. 

Axon has a rather unique history when it comes to stock splits. At the time it was known as TASER International and it actually split its shares three times in one year, possibly a Wall Street record. 

In February 2004, it split the stock 3-for-1 as shares reached a record high, and two months later it split them again 2-for-1. Then, as the stock continued soaring, Axon split it again 2-for-1 that November.

Stocks splits, of course, are a corporate non-event. They have no real impact on the underlying fundamentals of the company, but investors love them anyway. They are viewed as a bullish signal by management that more growth is on the way. It’s also an effective way to artificially lower the share price and give more investors an opportunity to buy them. 

Just remember that a stock split only reflects the strong past performance of the company and is not a crystal ball into the future. A split is also not creating any new shareholder value, so investors still need to scrutinize the business before buying.

An AI boost to growth

Earlier this year Axon introduced generative AI into its software called Draft One. It takes video from police body cameras and extracts data to write the first draft of police reports. Chief revenue officer Joshua Isner told analysts, “In the three months since launch, Draft One has generated over $100 million of pipeline, the fastest of any Axon software product to do so.”

With that kind of momentum behind the company, sales and profits soaring, and a stock price near all-time highs, Axon Enterprise is a prime candidate to be the next stock-split stock.