We recently compiled a list of the 11 Best American Defense Stocks to Buy Now. In this article, we are going to take a look at where Axon Enterprise, Inc. (NASDAQ:AXON) stands against other best American defense stocks.
America’s defense sector has struggled under Trump’s second term as president, amid mixed views on military expenditure in the early days of his second stint. Shares were volatile last month following his statement to cut defense spending in the future, and later in response to a contentious spat with visiting Ukrainian leader, Volodymyr Zelensky, at the Oval Office.
The creation of DOGE is also reshaping investors’ views of the industry. Byron Callan, managing partner at Capital Alpha Partners, believes there is a high level of uncertainty in the US defense sector related to current and future programs and the likelihood of severe cuts to government workforces.
READ ALSO: 13 Best Defense Stocks to Buy According to Billionaires and 10 Best Large Cap Defense Stocks to Buy Now.
On the other hand, Trump’s pivot on Ukraine has fueled robust gains in defense stocks elsewhere, especially in Europe, where several armament manufacturers have seen double-digit growth this year, with some even reaching record highs, as governments faced pressures to increase military expenditure.
Washington has repeatedly called for Europe to spend more on defense, while stressing that the US could no longer foot the bill. EU leaders met in Brussels last week to discuss the ‘ReArm Europe Plan’, which will allow the bloc to mobilize funds up to $860 million through bonds and relaxed rules on borrowing and spending.
According to a report in Reuters, asset managers across Europe are planning to increase exposure to defense stocks, under pressure from investors and politicians to loosen restrictions. Funds that have been badged as ‘sustainable’ under the EU’s rules are required to ensure their investments do no significant harm, because of which they tend to avoid the sector completely.
Several Korean companies have also benefited from Europe’s defense splurge. While the performance of the US defense sector was lagging behind Europe and Asia well before the presidential elections, the gap has widened after Trump’s victory.
Despite a grim outlook, Citi analyst, Jason Gursky, is urging investors that this is the right time to buy American defense stocks. Here is what he wrote in a note to clients last week:
“We recognize the world order is evolving under the current President, perhaps to a multi-polar one in which three countries control spheres of influence over the Americas, Europe and Asia. However, we don’t view that world to be any less dangerous or one that decreases the need to acquire the tools of deterrence.”
Trump’s recent statement on resurrecting American military and commercial shipbuilding has also been well-received. Shares of a major naval defense contractor have surged over the past week, following the announcement. The US president has vowed to fix the industry, which he sees as vital to national security, given the strategic competition with China.
A technician in a white coat testing an in-car system on a modern military vehicle.
Our Methodology
For this article, we sifted through screeners to identify American stocks in the aerospace and defense industry. From there, we selected the 11 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 1,000 prominent hedge funds as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 64
Axon Enterprise, Inc. (NASDAQ:AXON) manufactures weapons and technology for law enforcement agencies, military, and civilian use. The company integrates cloud software solutions and hardware devices to help enable modern policing, defense, and security.
On March 5, the company announced proposed offerings of $1.5 billion in senior notes due 2030 and 2033. Axon Enterprise, Inc. (NASDAQ:AXON) intends to use the proceeds for general corporate purposes, which may include providing capital to support growth initiatives, potential share repurchases, and redemption of convertible senior notes due 2027.
Axon Enterprise, Inc. (NASDAQ:AXON) recently announced impressive results for fiscal 2024. It generated a revenue of $2.1 billion, up 33% from last year, and nearly double from the figure two years ago. The company also marked 12 successive quarters of 25%+ revenue growth.
Annual net income stood at $377 million, supporting the non-GAAP net income of $466 million. Axon Enterprise, Inc. (NASDAQ:AXON) is heading into 2025 with positive momentum and expects to deliver around 25% growth in annual and adjusted EBITDA margin, both, for the current fiscal year.
Axon Enterprise, Inc. (NASDAQ:AXON) is one of the best defense stocks to buy now. Wall Street analysts are bullish on the stock with a consensus Strong Buy rating. According to Insider Monkey’s database for Q4 2024, 64 hedge funds held a stake in the company, up from 46 at the end of the third quarter.
Overall, AXON ranks 7th among the 11 Best American Defense Stocks to Buy Now. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AXON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
