Missed Apple Stock? 2 growth stocks to buy and hold forever.
Apple has the kind of brand authority that most companies will never achieve, and it has used that competitive advantage to build a very sticky deal. Specifically, by pairing first-party hardware with software and services, Apple benefits from recurring revenue and high switching costs. This has made it a cash flow machine, and shareholders have seen a 560% return over the past decade.
To block (NYSE:SQ) and Axon Enterprise (NASDAQ: AXONE) aren’t quite the same as Apple, but both have earned brand recognition in their industries while blending hardware, software and services to create a sticky business model. With that in mind, I think Block and Axon could also skyrocket 600% (or more) over the next decade.
Here’s what you need to know.
Block makes financial services easy and accessible. Its Square ecosystem is a robust suite of hardware, software and financial services that helps sellers run an omnichannel business. This includes everything from point of sale systems and card readers to payment processing and banking services.
On the other side of the business, the Cash app allows consumers to deposit, spend, and invest money from a single platform, and Block’s lack of physical infrastructure means that it can acquire customers much more efficiently than traditional banks.
More broadly, the breadth of the Square and Cash App ecosystems differentiates Block from many of its rivals, which has led to impressive growth. Gross profit soared 50% to $4.8 billion last year, driven by increased engagement in both ecosystems. In particular, more middle-market sellers (i.e., those making over $500,000 a year) are turning to Square, and these merchants tend to use more software, which means the relationship is stronger and more profitable for Block. Ultimately, the company generated $965 million in free cash flow in the last 12 months, compared to a loss of $344 million in the prior year period.
Block also integrates its Buy Now, Pay Later (BNPL) platform, Afterpay, into Square and Cash App. Sellers should benefit from increased transaction volumes, as BNPL tends to increase conversion rates and basket sizes. And sellers can leverage consumer purchase data to provide targeted product recommendations through the Cash app. This could unlock a natural synergy between ecosystems.
Collectively, Block values its US addressable market at $190 billion in gross profit, including $70 billion from App Cash and $120 billion from Square. This means that Block has captured less than 3% of its opportunities in the domestic market and that the company has a growing presence in Europe, giving this title enough track to overtake Apple’s performance over the past 10 years. last years.
2. Axone Company
Axon specializes in public safety technologies. The company is best known for its pulse therapy devices (CEDs), which are sold under the Taser brand. In fact, it was formerly known as Taser International, but was renamed Axon in 2017 to reflect its growing software and sensor business. In this segment, Axon offers body-worn cameras (and other sensors) that stream geolocation and video data to Axon Cloud, a suite of software for digital evidence management, reporting and real-time operations.
Collectively, these products help public safety officials (think police, first responders, and federal agents) work more efficiently and productively, while bringing transparency to law enforcement. Building on its early success with Tasers, Axon has also established itself as a leader in body cameras and digital evidence management software. This has led to steady and consistent growth.
Revenue rose 27% to $925 million in the past year, and the company generated $51 million in free cash flow, up from $5 million the previous year. But Axon has barely scratched the surface of its addressable market, especially when it comes to software and sensors.
In the last quarter, management said 25 agencies were now online on Axon Records, software that speeds incident reporting by replacing written words with video evidence and automating tasks such as transcription with artificial intelligence. For context, Axon has a customer relationship with 17,000 of the 18,000 US law enforcement agencies, which means there is tremendous opportunity to sell existing customers.
In total, Axon estimates its market opportunity at $52 billion, of which approximately 80% comes from Tasers (for civilians and law enforcement), body cameras and digital evidence management software. As a leader in all three categories, Axon is well positioned to create shareholder wealth, which is why this growth stock worth buying today.
10 stocks we like better than Block, Inc.
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Trevor Jennewin has positions in Axon Enterprise and Block, Inc. The Motley Fool has positions in and recommends Apple, Axon Enterprise and Block, Inc. The Motley Fool recommends the following options: Apple March 2023 $120 Long Calls and Short Calls of $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.