Why Axon Could Be the Best Stock to Buy in January

Stunning and camera ready, Axon Enterprise (NASDAQ: AXON) has been a portfolio game changer for long-term investors. The stock more than doubled last year and nearly quadrupled over the past three years, and it happens to be a 20-bagger since I bought in several years ago.

That said, hot stocks cool off, making Axon perhaps a puzzling choice as a top stock to buy this month. The maker of namesake wearable body cameras and Taser stun guns -- as well as the operator of Evidence.com, the cloud-based service that stores the recorded footage -- saw its shares soar 130% in 2024. Thankfully, history and Axon's strong momentum favor the bulls.

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History lessons but never lessens

It's been four years since I singled out Axon as a stock to buy in January 2021. It was a similar backdrop at the time. Axon was a market leader the year before, soaring 67% in 2020. It more than quadrupled the S&P 500's (SNPINDEX: ^GSPC) 16% gain in that wild pandemic-saddled year. It didn't take a breather in January, soaring 33% in that month alone.

An obvious catalyst for the stock four Januaries ago was the political unrest that took place around the last time a new president was sworn into power. Protests, clashes, and chaos weren't fun to live through as a country, but Axon emerged as an essential company by recording the confrontations so justice could be fairly doled out. Axon seems to be at its best when situations are at their worst.

The transition in presidential power later this month will likely and hopefully be smoother, but 2025 has already started with tense disruptions in New Orleans and Las Vegas. Calamity never seems to take a break, and Axon's strong track record of growth implies that it's an all-weather producer.

Image source: Getty Images.

Consistency is Axon's secret recipe

Axon raised its guidance in November, with a forecast of revenue soaring 32% in 2024. It was a good year for Axon, but you'll have to jog your memory to recall the last time that it's had a bad year of top-line gains: It has now rattled off 13 consecutive years of revenue growth exceeding 19%.

And it's not the only active streak where Axon is topping 19% for a worthy metric. Turning to the bottom line, check out how the company has fared against analyst projections over the past few quarters:

Data source: Yahoo! Finance. EPS = earnings per share (adjusted).

Axon has consistently trounced Wall Street targets for adjusted earnings over the past year by more than 20%. This level of reality exceeding analyst forecasts isn't going to last forever, but it should help explain why Axon crushed the market in 2024. Momentum is a beautiful thing when it's bullish.

A stock that more than doubles over the past year -- or a 1,000-bagger since going public in 2001 -- is rarely cheap. It's no surprise that Axon is trading at a rich market valuation. Even if we look out to 2025, Axon is trading at a lofty multiple of 92 times forward earnings.

Bears will argue that Axon's various business segments can be upended by cutthroat competition. The problem is that these same arguments have been whirling around through years of upticks. Axon has rarely traded at traditionally low multiples. Competitive threats have always been there -- Axon just finds a way to set itself apart.

Security isn't something you take chances on by finding a cheaper, unproven alternative. Axon is everywhere. Let me know the next time you see footage from a law enforcement camera that isn't powered by Axon. Taser is synonymous with energy weaponry. And its recent Dedrone acquisition makes it a force in arming first responders with drone capabilities, as well as detecting unauthorized drones in the sky.

Analysts see Axon delivering growth north of 20% on both ends of the income statement in 2025. They have a habit of aiming low. Axon has a knack for flying high. I like Axon's odds as a stock to buy in the first month of what should be another promising year.

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Rick Munarriz has positions in Axon Enterprise. The Motley Fool has positions in and recommends Axon Enterprise. The Motley Fool has a disclosure policy.