$AXON is a clear monopolist in the public safety sector, having left its competitors far behind. It continuously innovates to maintain this monopolistic position. I know many of you likely view it merely as a Taser brand—a company dependent on government contracts, with some software tacked on—and perhaps the heavy emphasis on artificial intelligence infrastructure makes it seem less appealing to you. However, the company has also begun expanding into hospitals and private security firms.
A common criticism of AXON is that its customer base—law enforcement agencies—is limited, slow-moving, and budget-constrained, and therefore, the company does not deserve its current valuation multiples. While this perspective might have held some weight when AXON was primarily a hardware seller, it no longer makes sense today. Software and service revenues are growing at over 30% annually, and the net revenue retention rate has surpassed 120%. Since its earnings report on August 5th, the company has secured 17 new or expanded contracts. Once an entity enters the AXON ecosystem, it rarely leaves—and, in fact, tends to increase its spending.
AXON is projected to grow at a rate of 30% through 2028. I realize this might seem modest compared to some of the other AI-focused companies you follow, but within its own sector, this is an exceptional growth rate—one that its competitors could only dream of. You might ask: is AXON expensive? Yes, it is, though it is cheaper now than it has been in the past. So, when does it become "cheap"? Based on data from S&P Global Market, the projected PEG ratio for 2028 is 0.5x; in other words, while the stock may be expensive today, it is attractively priced when looking toward 2028. In 2025, Axon’s revenue stood at $2.779 billion, while its future contracted bookings reached $14.400 billion. For 2026, the company is projected to generate $3.700 billion in revenue, with future contracted bookings—as of the second quarter—totaling $15.100 billion.
Through the issuance of bonds, Axon secured $1.15 billion in interest-free debt over a five-year term. In exchange, the company accepted the risk of shareholder dilution—should the stock price exceed approximately $652—but effectively transferred this risk to banks (up to a $1,050 share price) by paying a premium of roughly $115 million. If the stock price surpasses the cap, or if the bonds are never converted into equity, the impact of this premium remains limited.
In simpler terms: with the stock currently trading in the $410 range, if the price climbs above $625 by 2031, bondholders have the option to convert every $1,000 of debt into 1.53 shares. To protect existing shareholders (us) from dilution, management entered into a hedging arrangement with a bank, covering the scenario where bondholders might exercise their conversion rights—up to a share price of $1,050—at a cost of $115 million. Essentially, this means that unless the stock price reaches $1,050, there is no dilution for us, even if the bondholders choose to convert their debt into shares. If the price does exceed $1,050, the bondholders may then opt to acquire shares. Since this implies a minimum 140% increase in the stock price, I would be perfectly satisfied with a 120% return—at which point I could simply sell and exit. Ultimately, the CEO’s compensation is tied to success; if the company succeeds, he gets paid—if not, he receives nothing. I like managers like this; they are compelled to deliver strong performance, if only for their own sake.
Axon is currently trading at an EV/EBITDA multiple of 31x. Its low point in 2021 was 27x. This means that if the stock were to reach a 27x multiple, the price would be $300. For 2027, a 27x multiple would translate to $412. Depending on market sentiment, I plan to add to my position at price points between $400, $350, and $300. All the Axon shares I currently hold have a zero-cost basis; since these new purchases will be made using fresh capital, it won’t be a strain for me—so please, be more selective and cautious yourselves.
I’m sharing this for informational purposes—to show you how I track things, what I look at, and so on. And if you’ve noticed, I haven’t mentioned any risks at all—you’ll have to look into those yourselves.
