We recently compiled a list of the 11 Best Aerospace and Defense Stocks to Buy Right Now. In this article, we are going to take a look at where Axon Enterprise, Inc. (NASDAQ:AXON) stands against the other best aerospace and defense stocks to buy.
How Did The Aerospace And Defense Sector Perform in Q3 2024?
According to a report by Dinan Capital Advisors, the aerospace and defense industry’s EBITDA multiples increased by around 8% on average during the third quarter of 2024. Within the industry, the Maintenance, Repair, and Overhaul (MRO) segment stood out with the highest EBITDA multiple of more than 19%. The robust performance in the sector was driven by increased government spending, AI defense implementation, and increased global travel. As per the report, the global market size of the aerospace and defense sector is estimated to grow from $1 trillion to around $1.5 trillion during the next decade.
There are various factors contributing to growth within the industry. Firstly, the defense sector is experiencing significant expansion due to the ongoing conflicts in the Middle East and Ukraine. This rising defense demand resulted in a record defense order backlog of $747 billion, indicating an 11% increase year-over-year. Moreover, the Senate Armed Services Committee has projected that Congress will finalize the FY25 US defense budget at approximately $833 billion, exceeding last year’s spending limits.
In addition to increased defense spending, which is one segment of the overall aerospace and defense industry, international air traveling is also improving. According to a report by FlightGlobal, the global passenger traffic grew by 7.4% subsequently during the third quarter. Although the profitability of the global airline industry is still down by around $1.7 billion year-over-year, the subsequent growth in passengers indicates an ongoing recovery.
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Mitchell Reiss, American diplomat and distinguished fellow at the Royal United Services Institute appeared on a CNBC interview on November 7 to discuss how the defense sector will perform under President-elect Donald Trump. He said that the United States government is expected to increase its defense spending under President Donald Trump. Currently, defense spending is at its lowest level since 1998 and the geopolitical situation is more dangerous than the said year. Reiss thinks that the president will double down on some of the initiatives from his first term. Trump sees China as a United States adversary and he sees Israel and Saudi Arabia as stabilizing forces in the Middle East and will want to build upon the Abraham Accords. He also thinks that the president will call upon its European allies to increase defense spending.
While Reiss expects the United States’ defense spending to increase, he also noted that a third of the NATO countries are still not hitting the 2% mark in terms of their defense spending. Considering the geopolitical tensions between Russia and Ukraine, European countries would also naturally pivot towards increasing their defense spending. Reiss believes that if someone is interested in defense stocks there is a lot of growth potential within the industry.
A technician in a white coat testing an in-car system on a modern military vehicle.
Our Methodology
To curate the list of the 11 best aerospace and defense stocks to buy right now, we used the Finviz stock screener. Using the screener we aggregated a list of companies working in the aerospace and defense industry and sorted them by market capitalization. Next, we sourced the number of hedge funds holding each company from Insider Monkey’s Q3 2024 database. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 46
Axon Enterprise, Inc. (NASDAQ:AXON) is a company that focuses on providing advanced technology solutions for law enforcement and public safety. The products developed by the company include hardware such as cameras and TASERs, and cloud software for managing evidence and operations. It primarily serves law enforcement agencies at all levels including private security firms.
The company delivered robust growth during its third quarter results of fiscal 2024. The revenue of $544 million increased 32% year-over-year, surpassing analyst expectations. Revenue growth was fueled by strong growth across the board. Its cloud services revenue was up 36% year-over-year, whereas the Tasers revenue grew 3.4% during the same time.
While the demand for its Tasers and body cameras remains robust, Axon Enterprise, Inc. (NASDAQ:AXON) has been leveraging artificial intelligence into its products. Starting the fourth quarter of 2024, the company announced its AI Era Plan, which includes a suite of products designed to enhance operational efficiency and investigative accuracy. Some notable features include AutoTranscribe, Draft One, Automatic License Plate Reading (ALPR), and Video Redaction.
Considering strong demand for its products and growth prospects arising from the launch of its AI features, management expects fourth-quarter revenue to be in the range of $560 million to $570 million, representing over 30% year-over-year growth at the midpoint. It is one of the best aerospace and defense stocks to buy right now.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Axon Enterprise, Inc. (NASDAQ:AXON) in its Q3 2024 investor letter:
“Axon Enterprise, Inc. (NASDAQ:AXON) is a market-leading provider of next-generation law enforcement technology solutions. The company has had ongoing success with new product rollouts within both its TASER and body camera product lines, as well as its innovative software offerings, and the stock has responded accordingly. The company remains intensely focused on the development of new law enforcement solutions, and we believe recent developments in interesting areas such as drones, as well as in artificial intelligence-enabled solutions for evidence- and administrative-related uses, could provide an additional tailwind to the company’s robust growth.”
Overall, AXON ranks 9th on our list of best aerospace and defense stocks to buy right now. While we acknowledge the potential of AXON to grow, 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.
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Disclosure: None. This article is originally published at Insider Monkey.
