Are Institutions Heavily Invested In Axon Enterprise, Inc.'s (NASDAQ:AXON) Shares?

By
Simply Wall St
Published
June 21, 2021
NasdaqGS:AXON
Source: Shutterstock

Every investor in Axon Enterprise, Inc. (NASDAQ:AXON) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.

Axon Enterprise is a pretty big company. It has a market capitalization of US$10b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Axon Enterprise.

See our latest analysis for Axon Enterprise

ownership-breakdown
NasdaqGS:AXON Ownership Breakdown June 22nd 2021

What Does The Institutional Ownership Tell Us About Axon Enterprise?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Axon Enterprise. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Axon Enterprise's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:AXON Earnings and Revenue Growth June 22nd 2021

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Axon Enterprise. BlackRock, Inc. is currently the largest shareholder, with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.0% and 6.7%, of the shares outstanding, respectively. Additionally, the company's CEO Patrick Smith directly holds 0.7% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Axon Enterprise

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

I can report that insiders do own shares in Axon Enterprise, Inc.. It is a very large company, and board members collectively own US$184m worth of shares (at current prices). I sometimes take an interest in whether they have been buying or selling.

General Public Ownership

With a 20% ownership, the general public have some degree of sway over Axon Enterprise. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Axon Enterprise , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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