Summary

Axon Enterprise is a leading provider of public safety technology. It’s globally known  for its TASER devices, and has since expanded to body-worn cameras, SaaS and even drone security. It now targets a $77 billion opportunity outside of just law enforcement. Axon has demonstrated impressive long-term revenue growth, averaging ~30% annually over the last five years. It also grew recurring revenues by a CAGR of 44% since 2017, with 95% of its revenues last year coming from a subscription model. Its successful growth strategy has seen it post record profits in recent years. $AXON is up 24% year-to-date and over 1,100% in the last few years, with the consensus analyst price target suggesting further potential upside.

Payoneer Global is a leading fintech and payments company that enables seamless global transactions for SMBs, freelancers and enterprises. Since 2020, Payoneer has achieved at least 30% annual revenue growth and reached profitability last year. The company has also significantly improved its margins, with Q1 2024 marking its highest EBITDA margins to date. Payoneer is targeting a $6 trillion market opportunity, which if successful would substantially boost its growth. Despite its robust financial performance, its stock has remained flat since 2022, however analysts see significant potential for upside.

Axon Enterprises ($AXON)

$310.59 – Share price at time of writing

Source: tradingview.com

Summary:

• Share price at the time of writing: $310.59
• Axon Enterprise is a leading provider of public safety technology. While globally recognized for its TASER devices, Axon has expanded its product line to include body-worn cameras, in-car cameras and digital evidence SaaS systems.
• Axon aims to extend its customer base beyond law enforcement, targeting a total addressable market estimated at $77 billion.
• The company has demonstrated impressive long-term revenue growth, with recurring revenues growing at a compound annual growth rate (CAGR) of 44%. Currently, 95% of its revenues are derived from a subscription model.
• $AXON has performed strongly, increasing by 24% year-to-date with analysts suggesting further potential upside.

What they do:

Axon Enterprise, Inc. is a top provider of technology for law enforcement. Formerly known as TASER International, Axon is most famous for commercially producing the TASER devices that can now be considered staple equipment in law enforcement. The company also offers a range of products other than TASERs; including body-worn cameras, in-car cameras and digital evidence management systems.

Axon’s goal is to cut gun-related deaths between police and the public in the US by half by 2033. The company reports revenues in two segments:

1. TASER: Includes revenues from the sale of TASER devices and cartridges, plus related software and warranties.
2. Software and Sensors: Revenues from Axon’s body cameras and accessories, Axon’s fleet systems, and cloud-based software for managing digital evidence and supporting law enforcement operations.

Axon provides digital evidence management through Axon Evidence, productivity tools like Axon Records, and real-time operations solutions such as Axon Respond. All these SaaS solutions generated $697 million in annual recurring revenue as of December 31, 2023. Overall, Axon’s TASER segment produced about 40% of last year’s sales, with the remainder from the Software and Sensors segment.

Geographically, Axon derives the majority (86% last year) of its revenues from US-based customers. Its core customers are primarily US state and local governments, the federal government and commercial enterprises. However, Axon is slowly growing demand outside the country, with products also increasingly valued by a broader range of professionals outside of law enforcement.

What the market is saying:

$AXON gets a decent number of mentions on forums, with the general sentiment being that Axon has a strong business model primed for growth. It’s gotten more attention in recent months thanks to its strong price performance this year. The founder and CEO of Axon, Patrick Smith, even had a special “Ask me Anything” post on Reddit, a couple years ago.

Source: quiverquant.com

A recent comment from Reddit:

“Axon is huge. From what I know it’s exclusively used in the UK. BWV, taser and web storage which is Increasingly being relied on… I can confidently say axon has been one of the most positive user level changes to policing. ”

• Time-to-flyy

“They have a massive first mover advantage. Deep moat. I’m overexposed (>5% of my portfolio but I might add more on any weakness the market shows. So far the stock has been very resilient though. ”

• PM_ME_DANK

Why $AXON could be valuable:

Industry

Axon operates within the public safety technology industry, specializing in body-worn cameras, digital evidence management, and conducted energy devices (such as TASERs). The industry as a whole is expected to see significant growth, with forecasts predicting a CAGR of nearly 15% in the coming years. This growth is fueled by increasing demand for advanced technology solutions, regulatory pressures for greater transparency, and the global adoption of public safety tools.

Originally known for its TASER devices, Axon has significantly broadened its focus. The company now offers cloud storage services for digital evidence, enhancing its capability to manage and secure public safety data. Recently, Axon also entered the drone security market with its acquisition of Dedrone, expanding into aerial surveillance technology. Additionally, Axon is investing heavily in research and development, particularly in artificial intelligence, to drive innovation in its products and solutions. 

Axon President Josh Isner has described the company as a “connected device company,” underscoring its broad approach to security technology across various sectors. Its numerous product lines have since expanded its potential markets to outside of law enforcement. 

Having already established strong, long-term relationships with U.S. local and state agencies, Axon now sees its greatest growth opportunities in U.S. federal agencies, international organizations, and non-law enforcement enterprises. The company estimates its total addressable market to be $77 billion.

Financials

$AXON has demonstrated impressive long-term revenue growth, achieving an increase in revenues nearly every year. It has averaged a growth rate of about 30% annually in the last five years – a commendable rate for a company of its size. Based on its latest quarterly report, $AXON expects revenues to be around $1.94B to $1.99B in FY 2024, signifying an ~18% increase from FY 2023.

$AXON TTM revenues per quarter from 2009 to April 1, 2024:

Source: macrotrends.com

This consistent growth may be attributed to Axon’s growing amount of annual recurring revenues (ARR). In the last five years, Axon has grown its percentage of revenues coming from subscriptions – from 73% of total revenue to a staggering 95% last year. In dollar values, Axon’s ARR went from $194M in Q1 2020 to $825m in Q1 2024. While ARR does not guarantee future revenues, long-term contracted subscriptions give confidence in Axon’s ability to generate sales.

Looking at profitability metrics, $AXON has recorded a consistent average of 60% gross profit margin, which is also notable for a company that derives revenue from product sales. 

It has slowly grown its investment into research and development, bringing this expense to just over $300M last year – an increase of 30% year on year. Based on its recent years’ financials, it’s plausible that $AXON allocates R&D as a percentage of revenue (~20%). Given that, growing revenues may lead to higher R&D expenditures, which can help Axon reach its product development goals faster.

Axon’s bottom line is where it gets interesting. Despite a consistent trend in revenue growth, Axon recorded rather erratic net income figures, with the recent years being some of its best.  

$AXON TTM net income per quarter from 2009 to April 1, 2024:

Source: macrotrends.net

$AXON’s balance sheet shows strong figures, with current assets nearly tripling current liabilities. Similarly, long term debt levels are relatively low for Axon’s size. Meanwhile, its free cash flow alternates between positive and negative, mainly due to Axon’s investment acquisitions.

Price action

$AXON has recorded a 24% share price growth year-to-date and hit new record highs earlier this year. It has rallied over 1,100% in the last few years. The consensus analyst price target for $AXON is currently set at $369.62, representing potential upside of over 19% from its current price.

What the risks are:

Recent insider selling: Recent insider selling at $AXON, where executives have sold significant amounts of stock, may signal potential concerns about the company’s future performance or internal confidence among key leaders.

No dividend history: $AXON has not paid out dividends despite its long history. This lack of dividend payments may also suggest that the company is reinvesting profits into growth rather than returning value to shareholders, but could be a drawback for income-focused investors.

Inconsistent profitability: While $AXON has shown strong earnings in recent years, the inconsistency in earnings could impact investor confidence and raise concerns about the company’s ability to generate net income growth.

Bottom line: Axon Enterprise, formerly TASER International, is a leading provider of public safety technology. It produces TASER devices, body-worn cameras and in-car cameras, and now also provides a SaaS for documenting and storing evidence. Axon has shown impressive revenue growth, averaging 30% annually over the past five years, and expects stronger results this year. It estimates a total addressable market of $77B. Axon has posted record profits in recent years, that’s helped its stock price surge over 1,100% since 2017. Axon’s stock is now up 24% year-to-date with further growth potential suggested by analysts.

Payoneer Global ($PAYO)

$5.47 – Share price at time of writing

Source: tradingview.com

Summary:

• Share price at the time of writing: $5.47
• Payoneer Global is a leading fintech and payments company facilitating global transactions for SMBs, freelancers and enterprises.
• It has achieved a minimum of 30% annual revenue growth since 2020, reaching profitability last year.
• To ensure continuous profitability, Payoneer aims to maintain EBITDA margins of 25%. It successfully recorded its highest EBITDA margin of 29% in Q1 2024.
• Payoneer is now aiming to capture a $6 trillion market opportunity, which has the potential to significantly accelerate its growth.
• Despite strong financial results, $PAYO has traded flat since 2022. Analysts price targets signify potential upside for Payoneer’s stock.

What they do:

Payoneer Global is a fintech company dedicated to helping small and medium-sized businesses (SMBs) securely connect to the global digital economy. Its robust platform offers multi-currency accounts for managing both accounts receivables and payables, and it partners with nearly 100 banking and payment providers to facilitate transactions across more than 150 countries.

Payoneer’s core offering, the Payoneer Account, is specifically designed for SMBs to handle payments in multiple currencies. Additionally, Payoneer provides physical and virtual cards for ATM withdrawals and purchases. The company also offers working capital advances ranging from $50 to over $1 million, utilizing machine learning for risk management. For larger enterprises, Payoneer’s Mass Payout services enable global seller payments through various methods, including local bank transfers, international wires, and mobile wallets.

The company now has about 2 million active customers in over 190 countries, which include exporters, service providers, professionals and businesses working with international suppliers. Its clients sell through marketplaces, B2B or via web stores. 

What the market is saying:

$PAYO gets a few mentions on social media, with most of the discussion being debates on its valuation. There are also comparisons between its business model, growth prospects and metrics compared to its competitors, such as PayPal, Wise and PagSeguro.

Source: quiverquant.com

A recent comment from Reddit:

“PayPal is a 62 billion dollar company, PAGS is a 4 billion dollar company. PayPal expects revenue to grow by 6%. PAGS expects revenue to grow by 7%. PAYO expects growth of 15% and 20% next couple of quarters. Payo is growing at at faster rate than both of these companies.”

– ODoU92

Why $PAYO could be valuable:

Industry

$PAYO operates within the fintech and payments industry, a sector that has experienced significant growth and transformation in recent years. The global payments market more specifically, is expected to grow at a CAGR of 7% to 2027. This is driven by the increasing adoption of digital payment methods amidst the rise of e-commerce. As global e-commerce grows, the demand for efficient, secure, and cost-effective payment solutions is rising.

Similarly, the total value of cross-border payments is expected to jump from $190.1 trillion in 2023 to $290.2 trillion by the end of the decade. Within that entire market, Payoneer plans to pursue $6 trillion worth of opportunity, focusing on the B2B segment of cross-border payments.  

The growth potential in this industry is substantial, driven by several factors. First, the proliferation of digital transactions and the rise of global online marketplaces create an ongoing need for international payment solutions. Second, the expansion of the gig economy and remote work has increased the demand for services that facilitate cross-border payments for freelancers and businesses. Payoneer already markets itself to both business and freelancers. 

Additionally, advancements in technology such as AI are poised to further enhance the capabilities of financial transactions. Payoneer has already taken a step towards AI adoption with last year’s acquisition of Scott, an AI-powered data platform. As businesses and individuals seek to navigate an increasingly globalized economy, Payoneer is in a good position to capture a significant share of the growing market for innovative payment and financial solutions.

Financials

Despite being founded in 2005, Payoneer Global only went public in 2021. It’s recorded consistent revenue growth over the years, recording a minimum 30% year-on-year growth since FY 2020. Its Q1 2024 results showed revenues higher by 19% than Q1 2023, with analysts expecting further quarterly revenue growth in Q2 2024.  

$PAYO’s TTM quarterly revenue from 2021 to Q1 2024:

Source: macrotrends.net

In its short history of being publicly listed, Payoneer recorded full-year net income for the first time last year. Beginning Q1 2023, it hasn’t recorded a quarterly loss either. 

This may be due to Payoneer improving its margins over time. Payoneer’s gross profit margins have grown every year, from 70% from FY 2019 (earliest available data) to 85% last year. This trickled down to EBITDA margins, which was 3% in FY 2019 before going into the negatives for a couple years, to 14% last year. 

Payoneer’s TTM net income per quarter from 2021 to Q1 2024:

Source: macrotrends.net

Payoneer has now made it its goal to continue profitability, aiming for mid-term annual revenue growth in the double digits alongside maintaining an EBITDA margin of 25%. Last quarter, Payoneer boasted its highest ever EBITDA margin of 29%, boosting confidence that it can fulfill its promise.

Moving on to Payoneer’s balance sheet, one item stands out at first glance – Payoneer has a very small amount of long-term debt for a company of its size. At the end of Q1 2024, Payoneer only had $14.4M in debt; contrast that with its cash balance of $587M. Low levels of debt means less interest expense, thus lowering solvency and liquidity risks for the company.

Payoneer’s cash flow statement also shows good signs, with positive free cash flows in the last few quarters, save for Q1 2024. It seems like historically, Payoneer takes some cash to invest in marketing securities every first quarter of the year.

Price action

Unlike the broader tech market, $PAYO has been trading relatively flat since 2022, despite Payoneer recording strong and growing financial results since last year. The consensus analyst price target is $7.50, which means that $PAYO may have significant potential upside.

What the risks are:

Short period of profitability: Despite growing confidence in $PAYO’s ability to record net income, tangible evidence in doing so has only been seen since last year. There may be concerns on whether this profitability is simply short-lived.

Highly competitive industry: $PAYO is a smaller player in the highly competitive fintech and global payments industry. Its competitors include PayPal and PagSeguro, both of which have already captured substantial market shares.

Cross-Border Transaction Risks: Handling cross-border payments exposes $PAYO to risks such as currency exchange rate fluctuations, geopolitical instability, and differing international transaction laws, which can affect profitability and efficiency.

Bottom line: Payoneer Global is a fintech payments company that helps SMBs manage global transactions with multi-currency accounts, physical and virtual cards, and working capital advances. It has achieved revenue growth of at least 30% per year since FY 2020. Despite its relatively flat stock performance since 2022, Payoneer’s financial results are strong, marked by significant improvements in gross and EBITDA margins. The company aims for continued double-digit revenue growth and has recently reported its highest-ever EBITDA margin of 29%, bolstering confidence in its ongoing financial success.