Buying More Axon Shares After DHS Body Camera Update

Symbol	Transaction Type	# Shares Traded	Recent Price $	Shares Owned After Trade	% Portfolio
AXON	Buy	44	$475	420	3.7%

After you receive this alert and when the market opens, the Pro Portfolio will buy 44 shares of Axon (AXON) at or near $475. Following the trade, the Portfolio will own 420 AXON shares, about 3.7% of the Portfolio.

We are using a confluence of factors over the last few days to pick up more shares for the Portfolio. These include the pronounced pressure on AXON shares that has led to a plummet of more than 23% over the last several trading days, a move that, as we can see in the chart below, landed them in a deeply overbought condition.

The thing is, this free-fall move has come despite the lack of any new Axon news and continued indications of local and state police adopting body camera, cloud and AI solutions. Some have opted to lump Axon into the “software-as-a-service” bucket, attributing the share pressure to AI adoption, but we would counter full well knowing that Axon is an AI enabler in public safety and related markets.

Despite the continued favorable long-term outlook shared in Friday’s January Monthly Roundup, we’ve so far heeded the “don’t catch a falling knife” Wall Street adage until now.

The reason is twofold.

The first is one we shared with you earlier on Tuesday morning, and for those who missed that, we’re referring to Homeland Security Secretary Kristi Noem saying last night that every officer in the field in Minneapolis will wear a body camera, effective immediately. Noem added that this body camera program will be expanded nationwide as funding is available. To that, we can add comments from Minnesota Democrats, including Senator Amy Klobuchar, who is running for governor, that federal immigration agents should be held to the same body-camera standards as local police. And some Republicans have also signaled openness to the idea.

This not only points to a move up in body-camera spending but also to corresponding cloud and AI services. That is one aspect of the catalyst described above.

The other is that the pronounced fall in AXON shares is likely to spur short covering in the shares. The latest figures from Nasdaq peg short interest in the shares at about 2.66 million shares, with an estimated days to cover near 3.9. We would not be surprised to see that pop AXON shares, which is part of the reason why we are coming at you with this trade before the market open.

Next week, we will hear from Motorola Solutions (MSI) , and those results, guidance and discussion of the public safety market should be a positive for our position in AXON. While Axon has not announced its December quarter reporting date as yet, typically, it publishes those results and guidance in late February.

For now, we will maintain our $800 price target and focus on Axon’s average recurring revenue and future contracted bookings metrics when it does report. Exiting September, its future contracted bookings stood at $11.4 billion, which offers ample revenue coverage relative to current revenue expectations for the coming quarters.

On the housekeeping front, as we make Tuesday's trade, we will reset our AXON panic point to $420. As Axon shares rebound, we fully intend to lift that panic point.

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(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)

At the time of publication, TheStreet Pro Portfolio was long AXON.