De-Flocking Has Hit This Portfolio Holding
As the shares test technical levels, here’s the real catalyst we’re watching.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
So far this year, more than 50 cities and counties have canceled or deactivated automated license plate-recognition (ALPR) cameras of the type manufactured by private company Flock Safety. Indeed, yesterday Bloomberg reported Florida banned Flock cameras and license plate readers from state roads.
According to several reports, more than 135,000 automated license plate-recognition cameras have been identified nationwide, and four of every five of those are made by Flock Safety. Flock has shared that its cameras operate in 49 states.
What’s fueling the removal, as we understand it, is police and Flock employees were abusing their access to license plate data to track former partners (i.e., spouses, etc.). To us, this calls into question the data privacy safeguards with Flock’s system.
The Pro Portfolio’s position in Axon Enterprise (AXON) has come under pressure, arguably falling in tandem with headlines about license plate readers from Flock being uninstalled.
During Axon’s earnings call back in early August, management commented they were seeing a significant number of agencies aiming to convert from existing license plate readers to those from Axon because of the privacy and other controls. In our view, Axon is leveraging the privacy and security work it has invested in other software solutions such as Axon Evidence, its system for capturing, reviewing, and disclosing evidence that protects the chain of custody.
These Flock headlines will probably continue to pressure Axon shares, but when Axon management presents at the Goldman Sachs Communacopia & Technology Conference on September 8 and the Wolf Research TMT Conference on September 9, what is said about license plate reader program wins could be a catalyst for the shares. The same applies to management comments about accelerating AI adoption as well as expanding end market adoption for body cameras and other solutions.
Between now and those presentations, we are tracking the shares against their 200-day and 100-day moving averages. As we share these thoughts, AXON shares are flirting with the 200-day moving average near $505. Subject to market developments in the coming days, and given the beta of 1.40 associated with AXON, if we see the market trade off, odds are we could see the stock sell off further. That has us paying close attention to the 100-day moving average near $490.
As such, until we have the balance of this week’s data in hand, and what it says about inflation pressures and the pace of job creation, we are inclined to remain on the sidelines with AXON and others. But if Axon management says next week it is winning share in the license plate reader market from Flock, the combination of the pullback in the shares and that confirmation has the makings of a positive catalyst for the shares.
More Pro Portfolio:
- We’re Accumulating More Shares of This Oversold Holding
- We’re Tracking 23 New Signals Across Our Investing Themes
- August Monthly Roundup: Maintaining Our Lead Through the Ups and Downs
At the time of publication, TheStreet Pro Portfolio was long AXON.
