One S&P 500 stock I’m very bullish on right now is Axon Enterprise (NASDAQ: AXON). It’s well off its highs at the moment and I’ve been taking advantage of the weakness and snapping up shares for my portfolio.
It seems I’m not the only one who has been buying recently. Earlier this week, it came to light that US President Donald Trump bought shares (via a trust) in the public security company in February.
Trump invested up to $5m in Axon
Axon has been lumped into the software basket this year and a result, it has had a big pullback. Recently however, it has started to rebound as investors have realised that this company – which makes Tasers, police bodycams, anti-drone solutions, and more – isn’t a standard software company.
It seems news that Trump bought between $1m and $5m worth of Axon shares in February has given the stock an extra boost. Since that news came to light on 29 June, it has surged from $465 to $560.
Is it too late to consider buying?
I don’t think it’s too late to get involved here. Because the stock is still well below its highs.
And while the valuation is lofty, it isn’t crazy. Looking at earnings forecasts for 2027, the forward-looking price-to-earnings (P/E) ratio is about 50, which isn’t that high for a company that is consistently growing its top line at 30%+ per year.
It’s worth noting that this is a very innovative company. As an example, it is currently working on the Apollo Cartridge – a policing weapon system that fires non-lethal bullets.
We’re on a mission to make the bullet obsolete.
Axon CEO Rick Smith
Another example is its Guardian system, which can be integrated onto its body cameras. This uses AI to monitor situations for signs of escalation, and can automatically call for back-up if a police officer is in trouble.
This innovation should help to drive growth in the future. So should international expansion – at present most of its sales come from the US.
Institutional investor interest
I’ll point out that a few big-name investors have been buying Axon shares this year while they’ve been out of favour. One such investor is Scottish firm Baillie Gifford, which runs the Scottish Mortgage Investment Trust.
To my mind, buying activity from this firm is very encouraging. Because it has a track record of identifying high-growth businesses and making a ton of money from them.
Significant long-term potential
In terms of risks, the big one is a slowdown in growth. If revenue growth was to moderate, we could see valuation compression.
Another risk is competition from rivals such as Motorola. It’s a major player in public security today.
Taking a three-to-five-year view, however, I see a lot of potential so I think the stock is worth a look. With revenues forecast to rise significantly, I expect the share price to move substantially higher.
That said, it’s likely to be a turbulent ride. This is a stock that is very volatile.
Should you invest £5,000 in Axon Enterprise right now?
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Edward Sheldon owns shares in Axon Enterprise and Scottish Mortgage Investment Trust
