Axon Enterprise, Inc. (AXON): A Bull Case Theory

We came across a bullish thesis on Axon Enterprise, Inc. on Rebound Capital’s Substack. In this article, we will summarize the bulls’ thesis on AXON. Axon Enterprise, Inc.'s share was trading at $533.21 as of December 1st. AXON’s trailing and forward P/E were 170.93 and 68.97 respectively according to Yahoo Finance.

Axon, the pioneer of non-lethal electric weapons, has built a near-monopoly around its Taser products, which still contribute about 40% of revenue. Over the years, the company expanded into adjacent categories such as body-worn cameras, dash cams, and its high-margin cloud software platform, Evidence.com, creating an integrated ecosystem where hardware devices are bundled with multi-year software licenses.

This model has driven exceptional long-term performance, with Axon returning roughly 1,000x over the past 24 years. However, despite its dominant position, the stock has entered a 35% drawdown, including a 14% drop following its most recent earnings report, as strong top-line performance contrasted with weaker profitability. Revenue of $710.6 million slightly beat expectations with 30.6% year-over-year growth, but adjusted EPS of $1.17 fell well short of estimates.

The compression came from multiple factors: hardware margins were pressured by tariffs from suppliers in China, Taiwan, and Vietnam, with Q3 being the first quarter fully exposed to the higher costs; R&D spending surged 50% due to elevated stock-based compensation; and a stretched valuation near 200x earnings left little room for error.

Even after the sell-off, Axon trades at a premium multiple, though historically it has rarely dipped below 100x. Looking ahead, several catalysts could support a rebound. The company is rolling out new offerings including in-car video, automated license plate recognition, and AI-driven 911 transcription tools. International expansion continues to broaden its total addressable market, and industry tailwinds—ranging from increased demand for body cameras to the push for less-lethal policing—remain firmly in Axon’s favor, sustaining a compelling long-term narrative despite near-term volatility.

Previously we covered a bullish thesis on Axon Enterprise, Inc. (AXON) by RadnorCapital in March 2025, which highlighted rapid revenue growth, strong AI-era product adoption, and expanding international demand. The company's stock price has appreciated approximately by 6.78% since our coverage. This is because the thesis partially played out amid resilient bookings. The thesis still stands as Axon maintains a long growth runway. Rebound Capital shares a similar view but emphasizes margin pressures.

Axon Enterprise, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 62 hedge fund portfolios held AXON at the end of the second quarter which was 61 in the previous quarter. While we acknowledge the potential of AXON as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.