Raymond James sees Axon stock as a buy opportunity after recent 20% correction

On Tuesday, Raymond (NS:RYMD) James analyst Brian Gesuale increased the price target for Axon Enterprise (NASDAQ:AXON) shares to $645 from the previous target of $515, while sustaining an Outperform rating on the company. Gesuale noted that Axon's shares have soared by over 240% in the past two years, with a 130% increase in 2024 alone. However, the stock has recently seen a roughly 20% decline in the last month, which Gesuale attributes to a combination of profit-taking, valuation adjustments, and concerns over whether the company can continue to deliver strong results.

Gesuale remains optimistic about Axon's future, viewing the recent pullback as a buying opportunity. He believes that the company is successfully transitioning more towards software and artificial intelligence (AI), which is expected to lead to favorable estimate revisions when fourth-quarter results are released. The analyst has adjusted his forecasts to what he calls "Street high," anticipating that Axon's cloud revenue will reach $1.5 billion by 2026, which is $103 million higher than his previous model and approximately $200 million above the consensus.

The updated sales projection for Axon is now set at $3,160 million, exceeding the Street's expectations by $72 million, and adjusted EBITDA estimates have been increased by $29 million to $833 million. According to Gesuale, Axon's current trading at 15.4 times its estimated 2026 revenue is justified by its potential for significant estimate beats, the resilience of its business in the macro environment, and the growth of its software segment, which could lead to an expansion of its valuation multiples.

The new price target of $645 reflects a 17.8 times multiple on the company's projected 2026 revenue, which is within Axon's five-year range of 2.7 to 20 times. It also corresponds to a 2026 estimated enterprise value to EBITDA multiple of 67.5 times, versus a ten-year average of 31 times, and is based on a 30 times multiple of 2026 estimated annual recurring revenue. Gesuale's outlook is underpinned by his expectation of a substantial upside to estimates and the company's robust software business segment.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.