Understanding where these trends lay, as well as tapping into the best companies operating in the space, will increase your chances of making a positive return on your investment (as well as beating the market).
So, here’s one tech stock in the US – that operates in the law enforcement arena – that investors can consider buying and holding for the long term.
Axon Enterprise Inc (NASDAQ: AXON) is probably best known as the company behind the famous “Taser” stun gun.
However, beyond that the company also develops technology and non-lethal weapons for both military and police forces worldwide.
In fact, it has three “missions” that it states it wants to achieve as a company;
Obsolete the bullet
Reduce social conflict and;
Enable a fair and effective justice system
With its services tapping into the “zeitgeist” last year amid the widespread accusations of police brutality in the US, Axon wants to make policing more accountable.
In addition to its Taser stun guns, it is also building out Software-as-a-Service (SaaS) platforms such as “Axon Evidence” – that helps police forces digitise their records as well as help streamline their evidence management processes.
That’s just one example of the multiple offerings that exist for police forces on the “Axon Cloud”, which is actually the fastest-growing segment of its business and gives shareholders exposure to a nice recurring revenue stream (see below).
Source: Axon Enterprise August 2021 investor deck
Longer term, Axon estimates that its total addressable market (TAM) is a whopping US$52 billion – across law enforcement, consumer, enterprise as well as global geographies.
With 2020 revenue of just US$681 million, that means Axon has less than a 2% share of a massive potential market for its services.
Latest earnings positive
Axon reported its third-quarter 2021 earnings earlier this week, posting an impressive 39% year-on-year revenue growth to US$232 million for the period.
Even better is the fact that its annual recurring SaaS revenue expanded at an even faster pace during the quarter, jumping 42% year-on-year to US$289 million – driven by deployments in the federal market and international countries.
Meanwhile, third-quarter bookings hit a record US$488 million – up 54% – as demand for software and sensors drove gains.
The reaction to earnings was, shall we say, “positive” with shares jumping over 20% at the open although they closed the day up just 6%.
Riding the digitisation trend
Axon Enterprise is a prime example of a company helping to digitise an anachronistic industry (law enforcement) that would benefit hugely from “digital transformation”.
In the process, the company is hoping to do good for the world by reducing the need for bullets and guns to play a part in policing.
So far, the company has proved to be a success with shares up 540% over the past five years, outperforming the S&P 500 Index by a factor of four over that period.
Meanwhile, investors who held the company’s stock since its IPO in 2001 haven’t done too bad – clocking in gains of over 30,000% over the past 20 years.
For long-term investors who are looking at tapping into less obvious “megatrends” over the next few decades, Axon Enterprise provides a great investment idea that’s at the nexus of technology and law enforcement.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be.
In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.