Axon's Q4 Earnings Coming Up: Buy Now or Wait for Results?

Core Viewpoint - Axon Enterprise, Inc. is set to release its fourth-quarter 2024 results on February 25, with earnings expected to show significant year-over-year growth in both earnings per share and revenues [1][2][3]. Financial Performance - The Zacks Consensus Estimate for Q4 earnings is $1.51 per share, reflecting a 34.8$567.6 million, indicating a 31.3% year-over-year growth [1][2]. - For the full year 2024, revenue estimates stand at $2.08 billion, representing a 32.8$5.29, up 27.8% from the prior year [3]. Segment Performance - The TASER segment is anticipated to generate revenues of $217 million in Q4, marking a 34.8$221.9 million, reflecting a 35% increase from the prior-year quarter, supported by the growing user base and adoption of software applications [8]. - Investments in AI products, drones, and robotics are likely to enhance market share, with strategic partnerships, such as the one with Skydio, expected to bolster product offerings in public safety [9][10]. Cost and Margin Challenges - Axon faces challenges from rising costs related to business integration, increased headcount, and stock-based compensation, which have negatively impacted margins, with a gross margin decline of 180 basis points year-over-year in the first nine months of 2024 [11]. - Supply chain constraints, particularly for electronic components, are expected to inflate costs and delay product deliveries, while foreign currency fluctuations may also affect profitability [12]. Stock Performance and Valuation - AXON shares have increased by 45.4% over the past six months, outperforming both the Zacks Aerospace - Defense Equipment industry and the S&P 500 [13][14]. - The stock is currently trading at a forward P/E ratio of 80.93X, significantly higher than the industry average of 36.35X, raising concerns about potential overvaluation [16]. Investment Outlook - Axon is well-positioned with a diversified product portfolio and strong growth prospects in safety, drones, and robotics markets, supported by strategic collaborations and investments [17]. - However, near-term challenges related to operating costs and supply chain issues may impact margin performance [18].