Why Axon Enterprise Shares Are Down 5% Today

Actions of Axon Enterprise (AXON 5.25%) stock — maker of Taser guns and Axon body cameras for police — was up 5% by 10:35 a.m. ET Thursday morning.

You can thank JMP Securities for that. This morning, StreetInsider reported that JMP analyst Trevor Walsh raised his price target on Axon stock by $55 to $430 per share and reiterated his market perform (i.e. buy) prediction.

Why Wall Street Loves Axon

In fact, this was the second price target increase of the week for Axon stock. On Tuesday, Baird analyst William Power also chimed in his price target for Axon stock at $400. Like JMP’s Walsh, Baird’s Power predicts Axon stock will outperform the market and recommends buying the stock.

What’s got Wall Street so excited about Axon?

Axon reportedly met with analysts this week to tell its story. Analysts come away impressed by (says Power) “strong growth from core Taser 10, body camera 4 and (especially) software (which) alone grew 47% year-over-year in Q2” and now accounts for nearly 800 million dollars of the company’s annual revenue. .

As my colleague Josh Kohn-Lindquist reported last month, Axon grew total sales 35% in its fiscal second quarter, but its Draft One AI software tools, in particular, grew sales by 70% — two times faster than company-wide sales.

Is Axon stock a buy?

Yes, you read that right: Axon Enterprise is now an artificial intelligence stock, and with all the excitement that entails on Wall Street. And yet, with this new name comes risk.

On the one hand, the AI ​​revolution appears to be helping accelerate Axon’s already superb revenue growth rate (it has grown an average of 32% in revenue annually over the past five years, according to data from S&P Global Market Intelligence) — and now seems to be reaching 70%! On the other hand, Axon is not a cheap stock selling for 94 times trailing earnings and for an amazing 134 times free cash flow.

While the stock clearly has momentum on its side today, watch out if this growth rate ever slows. The first step down could be a doozy.