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On Thursday, Craig-Hallum adjusted its stance on Axon Enterprise (NASDAQ:AXON), downgrading the company’s stock rating from Buy to Hold, while increasing the price target to $625 from a previous target. The firm’s analysts pointed to Axon’s robust long-term prospects in various segments and anticipate strong fourth-quarter results and fiscal year 2025 guidance when the company reports on February 25th. According to InvestingPro data, Axon has demonstrated impressive performance with a 121% return over the past year, though the stock has recently experienced a 10.7% decline in the past week.
The rationale behind the downgrade is attributed to the stock’s substantial rally over the past year, which has led to a valuation that presents a balanced risk/reward scenario. According to the firm, Axon’s stock is trading at over 17 times the forecasted fiscal year 2025 revenue, leaving little margin for error in the company’s execution of its business plan. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with a P/E ratio of 153.6x and an EV/EBITDA multiple of 244.6x. Despite these high valuations, the company maintains strong fundamentals with a gross profit margin of nearly 60% and more cash than debt on its balance sheet.
Craig-Hallum anticipates record bookings for Axon in the fourth quarter, possibly surpassing $2 billion for the first time. However, the analysts also foresee potential near-term risks that could lead to the stock’s performance plateauing or dipping slightly in the coming quarters. They cite the first quarter’s historical trend of slower bookings and potential impacts from hiring freezes and budget cuts within the Federal government, which could slow the growth rates or alter the perception of growth in Federal contracts—a key driver of Axon’s growth in recent years. InvestingPro data shows strong revenue growth of 32.3% in the last twelve months, with 13 analysts recently revising their earnings estimates upward for the upcoming period. For deeper insights into Axon’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The firm’s decision to upgrade the price target to $625 while downgrading the stock rating to Hold reflects a nuanced view of Axon’s financial outlook and market position. The updated target suggests a recognition of Axon’s strengths and the achievements expected to be reported, balanced against the caution advised by the current stock valuation and possible headwinds in the short term.
In other recent news, Axon Enterprise has been the focus of several analyst updates, reflecting a positive outlook on its financial and strategic positioning. JMP Securities has raised the price target for Axon to $725, maintaining a Market Outperform rating, highlighting the effectiveness of Axon’s products and the anticipated introduction of the AI Era Plan bundle in 2025. Goldman Sachs also increased its price target to $700, citing a robust fourth-quarter EBITDA projection for 2024 and significant future contracted revenue, supporting Axon’s premium valuation. TD Cowen initiated coverage with a Buy rating and a $700 price target, emphasizing Axon’s strong market share and the potential success of upcoming product cycles like TASER 10 and Body 4.
Raymond (NSE:RYMD) James increased its price target to $645, seeing the recent 20% stock correction as a buying opportunity, and highlighted the growth potential in Axon’s software and AI segments. The analyst anticipates favorable estimate revisions with the release of fourth-quarter results, projecting cloud revenue to reach $1.5 billion by 2026. Despite a recent 8.5% intraday drop in Axon’s stock, which marked its largest decline since May 2023, analysts remain optimistic about the company’s future, pointing to its strategic initiatives and market positioning as key factors for growth.
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