Morgan Stanley thinks Axon Enterprise is primed for more growth in the coming months. Analyst Meta Marshall has upgraded Axon’s stock to an overweight rating with a price target of $700, suggesting about a 10% increase from Monday’s closing price. The stock has already surged more than 146% so far this year.
In its recent earnings report, Axon, known for its law enforcement tools like the Taser and body cameras, announced over 30% annual revenue growth in each of the first three quarters of the year, maintaining more than a 25% growth streak for 11 straight quarters. Considering this, Marshall believes Axon’s growth is “durable.”
Marshall noted in her Tuesday report to clients, “We are increasingly confident that the ~25-30% growth AXON is experiencing is sustainable as software becomes a more significant part of their model.” Despite the stock’s steep valuation, it’s viewed as a core long-term holding due to its consistent performance this year.
She acknowledged Axon faces a “very big hurdle” with its high forward price-to-earnings ratio of 124.5, according to FactSet. However, she pointed out that its free-cash-flow margins and operating profile have started to align with those of its high-growth peers, becoming more appealing to investors. Additionally, Marshall highlighted how artificial intelligence offers Axon opportunities to upsell customers to more premium products, potentially increasing the total addressable market and supporting further growth.
“As a consequence, we are more inclined to attribute value to Axon’s AI-driven portfolio enhancing other products, which might lead to more upside in valuation, as preliminary AI-related growth is likely included in recent pricing,” Marshall added.
Marshall’s bullish outlook aligns with most Wall Street analysts covering Axon. Out of 16 analysts, 14 rate it as a strong buy or buy, with the remaining two suggesting a hold. Despite this enthusiasm, the average target points to a potential 13% decline based on Monday’s closing figures. After Marshall’s report, Axon’s shares rose about 2% on Tuesday, reaching a new all-time high.
